It was common in games to expect to lose your items if you died. However, there is a mechanic for this I've been liking more and more, Insurance.
In a thief plugin, for Minecraft, that a friend is working on, we discussed how to keep it fun despite the fact your stuff can be stolen. In our case we added bounties, but Insurance is the key item that would cross over here. What I recommend, is for players to be offered "life insurance" they pay x Amount, and will be insured for X*100, or some odd factor like that. so if I paid 1 credit, I would then be insured for 100 credits. Then when my player dies, I can go to the insurance office in my town (similar to a shop) where it shows all the items I had with me at my death, and then I can purchase them back with the insurance money, or my own cash as well. Then I don't lose things as much, and I have the option to buy them back, so I don't have to go on some crazy quest to get them. But as soon as I fund more money into the insurance, it wipes out what was recorded from my previous death. That way its only for future deaths. You could of course increase this ratio to X*1000 or something you deam more reasonable, but it provides protection for important items.
Another idea is to cast spells of return. Perhaps they cost a lot, particularly depending on the Rarity or Value of an object, but once cast, the items always returns to your bank vault on your death. Or back to your inventory just as you had it, equipped or not.
But this way, your players do have a way around this. It costs, but it puts the power with them. Usually after losing an item or two of value, most players will start taking advantage of insurance and/or spells of return.
Moltar - "Do you even know how to use that?"
Space Ghost - “Moltar, I have a giant brain that is able to reduce any complex machine into a simple yes or no answer."
Dan - "Best Description of AI ever."
My Game(s), Warp Wars is in early development and can be found here: http://blog.WarpWars.Net.