If your SIM card dies, your phone doesn't work. Hardware defects in cell phones can kill SIM cards, particularly phones that get hot from a battery overcharging. It's always a good idea to consider upgrading your phone if the SIM card dies.
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Without the SIM card, the phone is useless.
Without a SIM card, unless you're getting a fairly old phone as a replacement, your new phone won't work either. If you're happy with your existing phone, replace the SIM card.
Your cell phone's SIM card is the hard drive for your phone. It contains all of your account information, as well as your contact book with names and phone numbers. Whether you should replace the phone as well as the SIM card should be determined by how happy you are with the phone, but you're going to be replacing the SIM card no matter what.
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