Fear checks and Insanity for Dungeons & Dragons 5E

What ho, Adventurers! Today I wanted to discuss incorporating some form of fear based insanity mechanic into my upcoming D&D game.

My inspiration comes from Call of Cthulhu, and that style of gaming will be a big part of what we do. I also thought it would add a little bit of realism. In the low magic world we will be playing in, seeing shambling undead and gore drenched demons will not be such an everyday occurrence that folks just shrug their shoulders and get on with killing stuff. It should be frightening (at least to those that fail their wisdom checks). 

Reading through the Players Handbook, I noticed the rules for exhaustion (p.291). These line up perfectly with what I wanted to accomplish with insanity. There are 6 levels of exhaustion, and each level brings a greater penalty, leading up to death. For our purpose, it would be 6 levels of temporary insanity, leading up to permanent insanity rather than death. Whether that final state is curable would be up the DM, and that might be a quest in itself. Regardless, the player would probably need to roll up a new character, so in practical terms it is about the same as dying.

Fear checks would be conducted whenever something frightening happens. This can be a terrifying event or fearsome monster, and some creatures already have fear effects built right in, such as the ghost and it's horrifying visage. Successive events of the same type or monster would not provoke a further check for 24 hours, as the characters are temporarily inured to that particular horror. 

My formula for the check would be this:

• roll 1d20 + WIS bonus + level - current level of insanity

My reasoning for adding your current level to the roll is that as you become more experienced (higher in level), you are more jaded and less likely to be affected by frightening events. Also, someone with a low Wisdom and a negative modifier will be more likely to fail, as will someone who is already slightly insane.  

I would probably apply a DC of 10 for most circumstances, unless they were especially horrifying. Of course, each character may have their own weaknesses that might call for a higher DC. In addition, they may have unusual phobias of situations that might not normally call for a fear check. The halfling may have a fear of heights, or the plate clad dwarf that doesn't know how to swim may cringe at the sight of a boat. 

For those still waiting for their Players Handbook, the levels run as follows:

1. Disadvantage on ability checks (eg. too jittery to pick the lock well)
2. Speed halved (eg. looking over their shoulder, tripping over their feet)
3. Disadvantage on attack rolls and saving throws (eg. seriously panicked and unable to think clearly)
4. Hit point max halved (eg. nervous breakdown)
5. Speed reduced to zero (eg. hiding immobile in a corner from the terrors all around)
6. Permanent insanity (eg. taking off all their clothes and running screaming through the night)

These effects would be distinct from actually being "frightened", which is a separate condition with its own rules. "Frightened" refers to being afraid of one creature, whereas these insanity conditions are more general.

To recover, a short rest would be enough to bump a character down a level of insanity, and a long rest should be sufficient to wipe out accumulated levels completely (except for permanent insanity).

I hope this will add a bit of extra flavour to our campaign, where physical damage isn't the only potential negative outcome. I'm anticipating that my group of low level adventurers will be nervously opening every door, and daring each other to peek around corners for fear of what my lie around them.

Any thoughts or suggestions are much appreciated.