I though about what will happen when the main character dies in my titanic projects. Guess the best idea is to perma-safe the body where he dies and then player have to restart but is able to collect the loot his old body to ensure that nothing is lost if he is able to get to the place where he dies. Imagine! Your dying short before a huge massive monster. Then you'll back with less valuable loot, combining the old equipment with the new one to finally defeat the evil bastard who killed you.
I think that's great.