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This is wrong, you regain sanity when in the starting van and you do not instantly die when on 0 sanity; it just increaces the chance of a haunting (the ghost locking the door to come and kill you)
Being in the dark, seeing events, seeing the ghost can all lower your sanity more quickly. The lower it gets, you start to see things other people don't and the ghost becomes more and more willing to kill you. It's just more likely though. Your sanity can be 90+ and you become a target.
Generally taking the pills is the only way to build the sanity back up reliably but there are other ways, but these have always been an accident or bug so I haven't learned them yet.