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Adding insulation to the exterior of a home correctly starts with establishing what climate zone you are building in and how the existing wall is built to make sure you are not creating a condensation point at a dangerous place within the wall assembly or preventing internal moisture from the occasional leak in the exterior skin from running away so the wall structure can dry out. We also add a vapor barrier and caulktape all the seams. In All But The Hottest Parts Of The United States Basement Walls Need To Be Insulated Insulation Insulating Basement Walls Basement Walls Basement Insulation Cellulose is also an option for basements but its not a product that Ill cover here. Insulating exterior basement walls . By insulating the exterior of basement walls we consume less interior space and prevent exposing walls to the seasonal freezethaw cycle known as thermal shock that can cause the cracking of foundations. Typically we see most wood framed walk-out basement exterior walls insul...