You were a Dragon once, but now you're a skeletal undead dragon. While physically weaker than the living counterpart, you don't need a head. Or organs, or anything for that matter to live. You simply exist. Replacing your missing bones is easy as any bones you do come across can be turned into compatible bones (but their durability is dependent on the bones themselves). You live as long as the phylactery inside you remains intact. But you can take it out and turn it into something else. Such as processing it into a valuable treasure. Necrotic or Undead Magic is much easier and stronger for you and Light or Holy Magic is your bane. Your Phylactery doesn't need to be near you for you to work. If Dragon was not selected then you gain a powerful boost in Magic.