Well who says you have to do either? If there is no risk to the character, it cheapens the struggle, yadda, yadda, yadda. But as we also know, the death of a beloved PC can rock the table in ways that few other scenarios can. Why not land somewhere in the middle and let the character live on, but not unscathed? In cases like this, you could opt to rule that the PC has gotten extremely lucky (or unlucky depending on how you look at it) and has managed to survive the ordeal. But survival has come at a price.
Let's say the character has sustained enough damage to spell certain death. Have the player roll a saving throw versus death (or whatever), and if they make the roll, then they have somehow avoided flat out dying in a puddle of their own goo. Now comes the fun part. Give the PC something to remember the glorious near death experience. Roll on a handy random table to determine what kind of souvenir the character has just acquired.
In this example, we'll use a 1D10. You can certainly create your own! And don't forget to apply the appropriate penalty for your game to reflect the character's new state of being.
- One eye lost. Player's choice.
- One ear lost. Player's choice.
- Character blinded.
- 1D4 fingers lost. Player chooses hand.
- 1D4 toes lost. Player chooses foot.
- Left arm severed.
- Right arm severed.
- Left leg severed.
- Right leg severed.
- 2D10 teeth lost.
There are, of course, a myriad of other things that can happen to a character as a result of a debilitating permanent injury. Let your imagination run wild with it.
This sort of thing can add some, well, character to a character. There can be numerous plot hook opportunities that might involve the character searching for a way to reverse the damage or at least offset it somehow. High level priests can be paid to restore body parts, or enterprising Gnomish wizards could be found that could create magical replacement limbs.
Violence should always certainly have dire consequences, but it's ultimately in the power of the DM to decide just how dire they should be. Death will always be a possibility, but it never hurts to consider ways grant the players one last chance (slim though it may be) to survive the ordeal in new and interesting ways.