When Do Children Understand Death?

I've always thought that death had no meaning to toddlers, that they were too young to comprehend the meaning of death. When my father in law passed away last year, it was not surprising that not only Umairah (then 4 yrs old) and Irfan (then 2 yrs old) did not shed a single tear, they thought that the many people that came to my in-laws house was an opportunity for them to have fun (play around and etc.). However, when they saw that many adults were crying or sad, they seemed to somehow understand that something sad was going on and they became less hyperactive (more quiet). I wasn't sure whether it was because they understood that people were sad or because the somber, grieving atmosphere somehow had a contagious effect on toddlers, just like in situations where laughing can be contagious to toddlers.

A month ago, somewhere in early September 2014, I was reading a bedtime book for Umairah and Irfan (has been part of the bedtime routine since Umairah went to PEEP/pre-school, somewhere in November last year) where the main character's mother died and he had to work hard, later on he saved a princess and got married. The part where the mother died was only 1 page, and I finished reading the book about 15 minutes after that, since there was a lot of questions and comments from Umairah and Irfan in between me reading out loud and animated. When I closed the book, Umairah suddenly started to shed tears and hug me and said "Yah tak nak mama die," and I was so shocked. For the first time, she seem to understand the meaning of death, although it took her a long time to digest it (the sad death part was very brief, 1st page and the story was followed by lots of adventure, more than 10 pages) and relate in to her situation. It was the death part that resonated to her compared to the many many pages of adventures and happy ending. I was touched by her words and her "evolution" and ended up crying myself and said "Mama don't want to die too"... but that's beside the point. Irfan seems to understand that death is a "bad" thing to happen, but he doesn't understand the weight of it's irreversibility, thinking it's just something "bad" like falling down when running or hurting your knee when playing.

Did the understanding of death just suddenly happen at that moment or was it a process that was building up and finally voiced out that night? When I supervise them playing outside with insects, ants and grasshoppers mostly, I cringe when they play too roughly with the insects. When the insect stops moving (dies), I tell them "See, it's not moving anymore. It's dead. Now it cannot go home to its mama and papa anymore and they will be sad" or "now it can never eat, play, sleep, drink, etc. anymore". Was something like that part of the process?

I know I have a long way to go to teach them about the vulnerability and the preciousness of life, but I guess it's important for parents to not underestimate our toddler's ability to comprehend what is going on around them and what we say to them.