Decision of Uncertainty

To buy or not to buy

University of Phoenix

QNT 561

July 24, 2011

Going on vacation is not always as easy as it seems. In planning for a vacation many factors affect the overall experience. In the scenario, I am taking a cruise and because of money and work constraints I am forced to take my cruise at time that may be the height of the hurricane season. I have booked the trip but must now make the decision to purchase hurricane insurance at an additional rate that will stretch my budget to the wire.

To assist in deciding rather or not to purchase the insurance, research was completed. The research includes the calculated probability of hurricane occurring during the time of my cruise and the probability of my cruise being canceled due to a hurricane. Researched showed a 5% chance that my cruise would be canceled by a hurricane. Thus saying, there was a 95% chance that my cruise would not be canceled due to a hurricane.

Additional research evidence showed that if there were to be a hurricane during the time of my cruise there could be a 90% chance the cruise could be canceled. Bayer’s Theorem was used to determine confidence levels for predicting the occurrence of a hurricane, a captain’s cancellation notice due to a hurricane, and purchasing hurricane insurance.

The information provided in the scenario gave statistical information to assist in deciding to rather to purchase the hurricane insurance. I decided that in order to make a sound decision additional research needed to be applied. I researched the benefits of purchasing not only hurricane insurance but also travelers insurance and what it included.

The major benefit of purchasing the hurricane insurance is that it would protect my funds used to purchase the trip should a hurricane cause the cruise to be canceled. The downside to purchasing hurricane insurance is that it will stretch my budget, and it only protects me if the cruise is canceled due to a...