The insulation around a wire has two purposes:
- to prevent contact with other conductors, the ground and other conductive objects; and
- to shield the wire from physical damage.
The type of insulation determines the environment in which it can be used safely. Wires used indoors are subjected to less exposure to the elements than those designed for outdoor use. Outdoor wiring is exposed to water and ultraviolet light, so the insulation is designed to withstand these elements. Insulation on wires buried in the ground must also be able to withstand the damp, corrosive environment of the soil.
Most of today's electrical wires have insulation coverings made of plastic or thermoplastic which provides a long, durable life. Many older wires used cloth insulation. Rubber was also common, but is not used as much any more since it becomes brittle and deteriorates over time.
The National Electrical Code gives various letter designations and classifications for different types of insulation on electrical wires. These letter designations help indicate the type of material the insulation is made of and in what type of environment it can safely be used without deteriorating.