The objective of insulation is to seal conditioned areas from air penetration, reduce heat transfer (R-value), and keep moisture out. In other words: insulation is needed to keep conditioned areas separated from unconditioned areas. It is important to insulate well (picture right), in cold and warm climates.

The building envelope is made up in to two layers:
1--The air barrier is made up of drywall and sheathing, to stop air leaks. It also keeps moist air from penetrating into insulation material, which can dramatically reduce the R-value, damage the building materials, create mold, and affect the health of the inhabitants
2--The insulation barrier is made up of insulation material (batts or loose fill) that insulates against heat transfer, but does NOT seal against air leakage.

Moisture will dramatically reduce the R-value (insulation capacity/value/rating) of any insulation material.

To protect against rain or moisture, a continuous vapor barrier should be properly installed within the wall system of the home. Have a well-functioning drain system between the inside and outside wall, and around the house have a well-functioning (French) drain system and a sloping ground to keep the rain away from the foundation and walls. Also, have a sill gasket on top of the foundation wall to prevent moisture from wicking into the framed wall from the concrete foundation via capillary action.

Insulation is needed at the thermal boundaries of the building envelope, including between framing members, called bridging. Areas that need insulation are: