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Thermal Insulation
Certain regions in the US suffer from winters so cold that water can freeze while it is in pipes. This can lead to burst pipes, which will result in expensive repairs and renovation, so good insulation is important to keeping the water flowing.
Insulation slows the transfer of heat from the pipes to the colder environment outside, keeping the liquid inside from freezing. When installing insulation for situations like these, it is important to not leave any gaps that can expose the pipe to cold air.
Energy Saving
Insulation can greatly improve the efficiency of a water heater by reducing the amount of heat lost to the surrounding environment. Heat bleeds out from the pipes into the surrounding area, causing the overall temperature of the hot water to drop, and increasing the time it takes for the water to heat up when the faucets are opened.
This is most noticeable in the cold, winter months, when temperatures around the water heater can drop significantly. By insulating the hot water pipes, you can increase the overall temperature of the water by 2%-4%, allowing you to lower your water heater settings. Since the water heats up quicker, you don't have to run the faucets for as long, and at lower settings the water heater will use less energy to heat up and keep the water warm.