Will an iPhone update lose contacts on my device?
No. Under normal circumstances with a properly synced iPhone updating the firmware will not lose any contacts. All information including contacts, calendars, apps and music are stored in iPhone backups or your iTunes library and are not affected by iOS firmware updates.
Restoring your iPhone as a new device will wipe all settings, but the contacts can still be restored from your iTunes backup. In the event that contacts are lost on your iPhone, this means that something is seriously wrong either with your iPhone or computer. iTunes will not delete contacts when updating your mobile device to the latest operating system.