It is interesting feature to bring adrenaline into mix and make it horror (sort of).
I knew a couple games back in days that had this feature. One I remember was flight sim, where one have to start game over in case of being shot down or just missing landing strip by a centimetre...
The other one, Rage of Mages in online mode, where one can lose all items+armor on death. Some items are expensive, while others may take forever to collect all over again. Imagine that in modern MMORPGS."whistling: