Let's say I have Sanity 3, the last Sanity step on my character sheet, and I choose to use the omen card Mask. I roll a 4+, which means I can put on the mask to gain 2 Knowledge and lose 2 Sanity. Did I just kill myself when I have only one Sanity step left? Does my Sanity level drop to a minimum? Or does it drop to 0, killing me? Can I decide after rolling 4+ that I don't want to use the mask?
The text on the Mask omen 4+ roll reads "You can put on or take off the mask.", keyword here I think being "can". If you attempt the roll and get the 4+, read as written you can choose not to put the mask on.
That being said, if losing 2 sanity would cause you to go lower than the lowest sanity level on your character, yes, putting the mask on would cause your character to "go insane" and your character would die and drop the Mask.
The one stipulation to this being that your character cannot die before the haunt has begun, so this only applies post-haunt beginning. That rule is on page 8 under "Making an Attack".