Describe how security is handled in the free-market system.
The Founders were wise when they considered the lessons of history, one of which being the relationship of government and military. The military could be understood to mean the sanctioned or legal body to employ physical force, and by necessity such an organization must remain under governmental control. The government has and should maintain a monopoly of force. Private armies are a prelude to civil warfare. However, that's considering "security" on a national or state level. One precept that's been forgotten is that the Founders were opposed to standing or professional armies, primarily because someone was bound to use them. By extension, they would be appalled at the expansion of governmental sanctioned force in the name of safety. The government's use of military force was contingent upon the people's good will to volunteer their services, as the principle of self-defense and hence security stems from an individual, extends to his or her household, neighborhood, community, state, and country. In short, one is responsible for one's own security, and from that security comes the security of the nation. Applying it in reverse is impractical and ineffective. Having and relying on the government to assume and provide all aspects of security does not fall under the doctrine of the monopoly of force, simply because the army or police cannot simultaneously protect and secure everyone. Security comes from the individual upwards, not from governmental mandates downwards. In a free culture, which includes a free market, individuals provide their own security.
I assume that you are talking about security in the sense of police or national defense.
In a pure free market system, you would have no overall police force or army. These things (this kind of security) are called "public goods" because they are things that everyone gets use from. In other words, the army can't protect me without protecting my next-door neighbor. For that reason, there's no way an army could be profitable and so no private company would produce an army (it couldn't tell my neighbor "we'll stop protecting you from the Russians if you don't pay your army bill").
Public goods will only be produced if the government produces them. So security (except for things like private security guards) will not exist in a pure free market economy.