Poly fusing external peripheral device
A fast blow fuse is your best bet to have a chance at saving electronics in case of a hard short it will also guarantee that the failed circuit is disabled.

Alternatively, active current limiting circuits can be done with discrete components, good PMIC have this function integrated .

A polyfuse or positive thermal coefficient device (PTC)  is a convenient device to protect against moderate but chronic overcurrents. E.g. on the output of a power supply that is driving too many loads, but is poorer choice for fault conditions.

As you point out the distinct disadvantages for safety shutoff is 


Slow trip time measured in seconds instead of milli seconds 
Slow recovery (up to 24hrs) during which field diagnosis and behavior may be poorly characterized 
Recovery itself may exaccerbate the issue, fault occurs device shuts off, next day some one tries again more damage, risne and repeat until there is no hope to repair the fault. 
Can have false positive trip from elevated ambient or local  temperature