Yes, SPICE will merrily carry on simulating, even if the components are being pushed to smoking point. Some simulation packages have attempted to warn or stop, if components get damaged, but the only one I've used did a pretty poor job. It would stop working if the current rating of a transistor was exceeded, even by 1µA for just 1µs, which was no good as any transistor can cope with such a short duration transient. I'd just disable that feature, because it was annoying.
One should look at the voltages, currents, power/energy dissipation of different parts of the circuit. Yes, I mentioned energy and power separately which might seem silly but for very short transients, it's more important than power. For example, a TRIAC might be able to withstand a surge of 100A, a power dissipation of a couple of hundred Watts, over a very short duration, but only rated up to 10A continuously.