It happens, and with greater frequency I think than any of us would like to see. The life of an adventurer is rife with danger, it's the game we're playing. Older editions of D&D were far more lethal than their modern versions, and even with the steps we've taken via house rules, it is still true. Grumpy grognards (including me) will often point out that new editions coddle their players by making them more powerful and worrying about encounter balance, but the fact is that was always true. DMs fudged die rolls behind the screen to keep PCs alive, whether it was lowering the number of monsters encountered, or missing when they should've hit, or making a bad guy miss a save, or any of a hundred other “balancing” things we did to keep the game, and the fun, rolling along.
Now I am a much more “let the dice fall where they may” kind of a DM. I try not to coddle my players with poor tactics, but instead to play monsters and NPCs as written, and I roll all of my dice out in the open, except in those cases where players need to make a decision without knowing whether or not they were successful, this is mostly in regard to Thieves Skills and Secret Door checks. That's my philosophy now, I am a neutral referee, as much as I can be when I am also controlling the opposition.
Preamble aside, death is an omnipresent part of the game, without the risk the rewards are meaningless; so here's a couple of things about death in Ostschild.
First off, those who are not buried with proper Christian rites are likely to rise as undead. This is said to be a curse placed on the kingdom by the Elf-King, but other people say it happens because there was pagan death cult centered on the area from ages past. Some people say it because of all the heretics and witches found in this kingdom, or maybe just the general rise in power of Satanic cults. Regardless, if you want your friends and family to rest peacefully, they need to be buried with proper Christian rites.
Secondly, and hearkening back to heathen times, heroes of Ostschild are often buried with grave goods proper to their station in life. Making a sacrifice of items to the grave of a hero, when he is interred offers actual, in game, benefits; the minimum of which is an increase in experience points. 250XP for a one use item, 1000XP for a permanent item. There is also the possibility of getting a random beneficial spell side effect that may last for up to a month, examples include protection from evil (or good), Bless, Invisibility to Undead, etc.
Funeral costs are not insignificant for heroes. If a hero dies in the wilderness, and his body cannot be reasonably transported back to civilization for burial, it is possible to give the hero a proper burial in the wild, but the benefits are lessened. You still get full XP for grave goods, but are less likely to receive any other supernatural benefit. However, if the hero's remains are transported back to civilization, or, by chance he dies there, a proper public funeral is in order. The cost of the funeral varies with the stature of the hero being interred, but generally includes the price of both the funeral service and the funerary feast.
Note that Christians (also Jews and Muslims) are buried, only heathens cremate their dead.
So, henceforth we need to keep this in mind.
Wills – Any character can designate an heir, the heir must be a blood relative of the PC and of the same species. The heir can receive all of the non-magical wealth of the deceased, minus a 10% inheritance tax collected by the crown and one magic item belonging to the dead character. Choose wisely and before your character dies. Any character that dies intestate will forfeit their wealth to the crown.
Dwarfs prefer to be interred if Christian, cremated if not. They never leave any of their goods to an heir in either case, preferring to take all of their worldly possessions to the afterlife.
Halflings follow the funerary rites of the communities in which they dwelled in life.
Elf bodies evaporate slowly over the course of several hours after being killed.