People "die" IN their dreams all of the time. You can read some real examples at... http://dreamdoctor.com/definitions/death.html?phpMyAdmin=29c2328cc73b8ed64ba7f78bbbec0416
From the www.dreamdoctor.com... "Dreaming of one’s own death (a dreamer may witness his or her funeral, or may “just know” that he or she has died) symbolizes an inner metamorphosis and an evolution of development." In short, "death" in dreams is about change. A part of your life has changed (or "died," metaphorically.) Once you "die" in your dream, it can continue with you "watching from beyond," lending further perspective to the dream's meaning.
Events and circumstances in your waking life generate your dreams. Waking life events that might might cause you to "die" in your dreams include... graduating, changing schools, moving out of your parent's home into your own, divorce, changing careers, retirement, etc.
Check out www.dreamdoctor.com to learn more about death and dying in dreams.