Life Insurance to fund buy-sell agreements

If there a number of shareholders it is prudent to have a buy-sell provision clause in the shareholder agreement. This clause generally provides for a trigger mechanism based on an agreed formula to value the entire enterprises in the event of death, disability, disagreement and other provisions and for shareholders to buy or sell their shareholdings under certain conditions at an agreed on price based on their percentage share ownership.
This could create a liquidity event to the existing owners and it is generally recommended to fund this agreement with life insurance.