Yeah that's not perma death
If you die everything you have is dropped, INCLUDING your cosmetic so other people could pick it up. BUT, when you die you will respawn with JUST your paid item for a certain amount of lives I guess. It's not like it's a gun or something to buy, you buy an cosmetic hat/clothing piece and just so you don't waste your money if you die you'll get a few lives with it. No gamplay effects, if you're that concerned about a simple cosmetic item carrying over on death you'd be better off not even playing a f2p game?
I find this an actually really awesome system if I ever decided to throw some money over. Nothing is worse than buying an item and then dying 20 minutes later and losing it forever. At least for this when you buy a neat cosmetic item you'll have it for a set amount of lives. I also like how you still drop the item so others can pick it up(I think) while you will still get it again.