I don't think even if Tom Hiddleston's contract is up they'll kill off the character, just place him back in asylum somewhere or to be left alone.Unless this is the last movie in his contract, I don't believe for a second Loki dies. As it stands, one of the single most praised aspect of Thor and Avengers was Loki's performance and his relationship with Thor.
I think he's run his course though. Being the villain for two films, one the biggest in the MCU thus far means people will start to tire of him as soon as he appears once more. It's good that he's an established, supporting actor, but much like the rest of the MCU I think the success of films will hinge on how well they continually shake things up and keep them interesting instead of stagnating.