You are on the right track, but there isn't a simple to apply rule. The simple rule is to keep all elements of your design below the ignition temperature of any materials that will be in contact with that element. As pointed out in prior posts some applications may require that to be true through one or more layers of faults. That may even be true for some domestic applications.
The simple rule is complicated to apply because:
1. You have to calculate heating which requires both power in (the easy part, current squared times resistance or whatever) and power out (convection, conduction and so on). And will airflow be the same over life with dust, filters and other factors?
2. You need to really think through what materials will be present. Kitchen applications leave the possibility of cooking oils and alcohols. Garage applications add gasoline and other solvents. Bathrooms with feminine presence have hairspray and nail polish remover among other things. What is the ignition temperature after these things have condensed on your circuit cards, or been spilled on the enclosure.
If you are not selling your device you get to decide how thorough an analysis is good enough for you. I wouldn't worry about it much as long as I wasn't working any components hard and had a good pwb supplier that didn't have any thin or narrow spots on traces, but then I store LiPo batteries and gasoline in my house. Others have higher standards of safety.
If you are selling your device you need to make it hard to pin the blame for a house fire on you, regardless of whether your device had anything to do with it. The charred remains of your device showing significant disregard for industry standards will be very tough on you if there isn't any other obvious source of ignition.