What happens when a PC dies in your game? Does the player get to bring in a new character? If so, does the new character come in at equal level as the one that was lost? Slightly lower level? Weaker relative to the rest of the party? Or start fresh at level one? Different games have different ways of handling it. Today I want to talk about some popular methods, the idea behind them, and why you might not want to employ any of them.
Weaker Than The Rest Of The Party
The most common version I've seen of this is new characters come in at either equal level to the weakest party member level wise, or one or two levels below the weakest party member (with a hard limit of level 1 for low level games.) The idea here is that surviving is rewarded with your character getting to grow stronger, and the "feel" of that growth is kept more meaningful by not having random people met on the road to fill gaps in the party automatically being the equal of the strongest party members.
This also lets the GM keep encounter balance fairly similar to how it was since the new player in the group is coming in at about the party's level. Since most games scale XP based on your level, the lower level characters - in theory - would also be gaining more XP or leveling faster to catch up making the difference in strength an ever shrinking band - though likely one that would never actually close all the way.
Some more hardcore games have new PCs always come in as new made characters. You lose your Rank 5 Bayushi Bushi? That's sad, make a brand new character at Rank 1 with no bonus XP. This is harder in games like D&D where a level 1 character in a level 7 party is basically going to get one shot immediately, but in other games like L5R or the old WotC games it is possible to survive, you're just a new person and have to be careful.
This again is about world feel and 'fairness.' It would be weird for the party to lose two rank 5 samurai, and then just run into two more. I mean, how common are rank 5 samurai supposed to be?
In a huge online game (200 players, team of about 20 GMs) we used this and it had a wonderful effect of creating a natural world where players who kept their character from day 1 were the movers and shakers of the world, and newer players the more rank and file. Still PCs, still able to grow, but you could feel the weight of certain characters, and when a Day 1 PC died it was often the talk of the server for a long time.
Karma is the term I've seen most often for a system in which, depending on how your character died, the GM will allot you a percentage of your now deceased character's XP to build your new character. Did you die in a grandiose heroic fashion that fit the story and everyone loved? You'll likely comeback with 90-100% of your old XP to make a new character. Did you just kill yourself because you were bored with the character? You get less. A lot less depending on the GM.
The idea here is to reduce the sting of losing a character in situations where the death came about for the "right" reasons. It rewards playing to the character, the story, and the world by removing the mechanical 'punishment' for death, while still keeping that punishment there for people who die in less optimal ways.
The problem with it is exactly the reason for it. It puts the GM in the position of judging deaths, which in turn can cause arguments when the GM and a player disagree on how in character, meaningful, or otherwise warranted a death was. In some groups this isn't a problem. In other groups it can be. It can flat out feel bad to have two people die in a session, and one of them get a larger "karma" reward than the other.
Some GMs have the idea that a punishment for a character dying is a "competitive" aspect to a game they want to be cooperative, and so there is no death penalty. If you die, you come in with a new character at the same level your last character had. It keeps things simple, removes any punishment, and also makes things easier for the GM who doesn't have to go and re-balance pre-planned encounters for a party that is now mechanically weaker. In properly cooperative games the other players may also appreciate the new person in the party being able to take an equivalent amount of slack from the group as the old character, which can drastically reduce the FNG effect.
In high death games this can reduce the feel of specialness being a high level has. After all, if everytime you lose a level 10 character you meet another level 10 character, just how rare is a level 10 person?
Which Is Best?
Which of these is best for your game is entirely dependent on your game, yourself, and the players in the game. Some games work great with no real death penalty. Other games are primed for new people come in at level 1 and start their story over as a new person in the world. What works best is up to you and your group. Just be aware that everything comes with downsides.
A Warning For Non-Level Based Games
One other thing to consider is that if your game uses XP to buy traits/skills directly, as opposed to a more level based system like D&D and Pathfinder, is that having a lump sum of XP will result in a more optimized character than building overtime.
Barring a player being the type to have a build in mind up to ridiculous levels of XP, and rigidly adhering to that, a character who earns 200 XP over 6 months of play will simply look different, and be less powerful in focus areas, than one who was given 200xp at once. The reason for this is because of how the XP is received. When you receive XP in 3-5 XP chunks over weeks and months you tend to spend it as it comes in. This means you're more likely to buy that 5xp skill up than save for the 18 xp trait up, even if the trait up is the stronger purchase even factoring in the heightened cost. The twists and turns of the game, time, and the player's view of the character will all go into shaping a character that is more nuanced and branched out than a lump sum purchase. Meanwhile, the person with the lump sum is basically looking at a big budget (200xp) and making a list of purchases with it. They aren't debating "can I survive the 3 more sessions to get the XP needed to up my hit points" they just see that upping their hit points to the desirable level takes a mere 10% of their XP they have.
This can be mitigated by giving the person XP in smaller chunks and telling stories in between each chunk to help flesh out who the character is, or it can just be accepted. It may not even be a problem for your game, or because of how your players build their characters (some people here don't feel happy until they have every skill in the book, just in case.) Still, it's worth keeping in mind.