Made them part of the history of the game
In our group we have been playing Call of Cthulhu for long and many players had gone mad and for us some times it was quite rewarding to get to know about their history as NPCs, how they have evolved later on. And well some of them appeared later on to help the group, or to trouble them... even one become a kind of Nemesis of the players...
We kept reading about them on the news papers and stuff, they were becoming known for their actions, and that was quite rewarding, to know they kept evolving, some times even the original player could get some decision on what the NPC would do in a certain situation...
In the end having this recurring characters that we knew very well as they were part of the team before, it was in a way very rewarding itself.
From there you can have some rewards that give a bit more to the new character of the player... maybe he/she can receive the house from the mad player as an heir (what actually can become good hook for a future adventure).
Example
Two players went beyond the border (0 COR
) on an adventure, they were a married couple (after a previous adventure), in the end she was catatonic but the she got a bit better (but still insane) and he become a powerful Cthulhu priest, the history kept evolving and she got pregnant with the son of Cthulhu (or that was what we thought) and he become a rich Senator that was some time helping the group, some time trying to kill us...
This character became one of the main NPCs of the whole story of the group, and even once we played an adventure (when we didn't knew he was hopelessly mad) to try to recover him and take him back to the group (because he was lost in the mountains...) in the end there seemed to be a crazy priest around there doing human sacrifices...
At first we didn't knew but we discovered our old pal with a robe, a girl on an altar and a knife... and then the player that was playing the mad character pretended that someone was taking control of his mind (screaming Take it out of my brain!!) in the end it was a really fun adventure where (first of several) the bad guy was this character.