I have a 2 month old son and I was thinking of buying life insurance for him. Is this a smart idea? Im not even sure how it all works. Could someone please explain to me the ins and outs of life insurance and why people buy it. Thanks so much for your help.

It's a rotten idea.

Life insurance is basically betting against the insurance company, if someone is going to die, during the "term" of insurance.

There's "term" policies - where the term is pre-set at 5, 10, 20 years, then there are "whole life" policies, which is that gerber mailer you're looking at.

Whole life is the most expensive way to insure a baby, AND, the payout isn't that much.

Run the numbers. Take your monthly payment, plug it into this calculator: http://www.msfinancialsavvy.com/calculators/monthly_deposit_savings_calculator.php assume an average 10% investment return if you put it in a growth mutual fund, and look how much you have when your baby is 21.

Then see how much the insurance company pays out if they die. HUGE difference.

Now, take that amount, and don't add anything to it, just keep the same 10% interest, until they turn 65 and retire. HOLY COW, is that number right? Yes, your child can retire a millionaire, for what the insurance company would charge you for $1,000 of life insurance coverage (that isn't enough to pay for a funeral, btw).

I DON'T INSURE CHILDREN.