How Wall Insulation Works
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Exterior walls of older homes may contain little or no thermal insulation.

Insulation provides resistance to heat flow. The more heat-flow resistance the insulation provides, the lower the heating and cooling costs. Heat flows naturally from a warmer space to a cooler space. In the cold winter, this heat flow moves directly from all heated living spaces to adjacent unheated spaces, such as attics, garages, basements, under-floor crawlspaces, and even to the outdoors. Heat flow can also move indirectly through interior ceilings, walls and floors — wherever there is a difference in temperature. During the cooling season, heat flows from the exterior to the interior of a building.
To keep the occupants of the building comfortable, the heat lost in the winter must be replaced by the heating system, and the heat gained in the summer must be removed by the cooling system. A properly insulated home will decrease this heat flow by providing an effective resistance to the flow of heat.
Insulation in the form of batts, blankets, loose fill, and low-density foams all work by limiting air movement. The still air inside the insulation is an effective insulator because it eliminates convection. Still air also has low conduction, so heat doesn’t flow very well via conduction through insulation. Some foams are filled with special gases that provide additional resistance to heat flow.
Reflective insulation limits heat that travels in the form of radiation. Some reflective insulation also reduces air movement, but not as much as other types of insulation.
Don’t confuse insulation’s ability to limit air movement with air sealing. Insulation reduces air movement only within the space it occupies. It cannot limit air movement through other pathways nearby. For example, the insulation in the wall cavity does not affect the air leakage that may take place around a window frame. Adding insulation will likely not have the same effect as air sealing.
Insulation's resistance to heat flow is measured or rated in terms of its thermal resistance, better known as its R-value.
An inspector may examine behind the siding (when possible) to determine the presence of insulation, if any, and determine the potential for insulating the exterior walls. A home inspector may use infrared thermal imaging to inspect the exterior wall for insulation anomalies.