Monte Carlo simulations have been widely used in the reliability assessment of power electronics systems. However, the conventional Monte Carlo simulation method is not directly suitable to be applied to the system with fault-tolerant operation, where the accumulated damage during the pre-fault operation needs to be taken into account as an initial damage during the post-fault operation. To address this issue, a Monte Carlo simulation method based on incremental damage concept is proposed in this letter. The proposed method recursively accumulates the damage over time, making it possible to monitor the damage level of the individual sample when the failure occurs, and then being used as the initial damage during the post-fault operation. Therefore, it can be applied to the power converters with faulttolerant operation, which has been demonstrated with a case study of three-phase inverter having a fault-tolerant topology.