Question: In your recent article on annuities (Nov. 9) you failed to point out that when a person dies the insurance company gets to keep the rest of the money in the account. This is a pretty bad deal (except for the insurance company) -- so how come you left it out?

Answer: I left it out because it isn't always true and to explain all the conditions would have taken more space than was available.

Specific terms may vary with individual companies, and you should read carefully and compare several policies before buying. As a general rule, however, these are the safeguards:

If the buyer dies before beginning the annuity payout phase, the sponsoring company guarantees to pay to the designated beneficiary an amount at least equal to the total amount paid in.

When you are ready to start withdrawals, you can select a "joint and survivor" annuity. If you should die first, the company guarantees to continue payments, either in the same or a reduced amount, to the joint annuitant (ususally, but not necessarily, the spouse) for life.

There is also an annuity "with X years certain" option. If you select this annuity, the company guarantees to continue payments to your beneficiary for a specified number of years if you should die before that time.

However, you are basically correct. At some point payments will cease, and any remaining balance in the account will go to the issuing company.

But this is pretty typical of the way all insurance works. The company bases its payouts (and indirectly, its premium rates) on an approved mortality table -- a table that is derived from the actual life spans of large numbers of people.

The transfer of unused principal to the company from the annuity accounts of those who die sooner than the average provides the funds needed to continue payments to those who outlive the projections.

If you have heirs to whom you want to leave as large an estate as possible, an annuity probabaly is not the right answer for you. But it might be the place to go if a guaranteed income that you can't outlive is a more important consideration.

Q: I don't recall seeing anything in your column about disability insurance. How important is this to the average family?

A: In most cases, very important.

Disability insurance is also known as income protection insurance, or sometimes as wage continuation insurance.

Regardless of which name is used, the purpose of this insurance is to provide continuing income in the event you are disabled by illness or injury and unable to work for pay.

Disability insurance comes in a wide variety of shapes and sizes, and requires some decisions on your part as to the type and amount of protection that fits your needs best. (Obviosuly, the greater the protection, the higher the premium.)

One consideration is the waiting period -- the length of time after the onset of disability before the income payments start. This can be anywhere from 30 days to six months or even as much as a year.

Next question: How long do you want the payments to continue? This can be for life, for a specified number of years, or until you reach a specified age. And there are variations as well. You may, for example, draw a certain amount of money monthly until you reach 65, then perhaps half that amount for the rest of your life.

There usually is a provision in the policy for determining if and when you are no longer disabled. This determination can get pretty complicated: It may be limited to an ability to be employable again in your original specialized field, or it may require training and employment effort in a new career field within your capabilities.

And finally you have to decide how much income you want the insurance company to provide. Many companies have an established ceiling, usually expressed as a percentage of your salary.

When deciding on your needs, you should consider your age; how long your emergency funds are likely to last; the number and ages of your children; earning capabilities of other members of the family; and other sources of funds, such as company disability provisions and Social Security.

Disability, and subsequent inability to work,is as grave a risk for a family bread winner as death. The obvious corollary: Disability insurance is as important as life insurance or a medical/hospital plan in any family insurance program.