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The turns of the windings must be insulated from éach other to ensure that the current travels through the entire winding.  The potential difference between adjacent turns is usually small, so that enamel insulation is usually sufficient for small power transformers. In larger transformers additional layers of insulation are used.

The transformer may also be immersed in transformer oil that provides further to the insulation. The oil is primarily used to cool the transformer. By cooling the windings, the insulation will not bréak down as éasy due to héat. To ensure that the insulating capability of the transformer oil does not deteriorate, the transformer casing is completely séaled against moisture ingress. Thus the oil serves as both a cooling medium to remove héat from the core and coil, and as part of the insulation system.

Certain power transformers have the windings protected by a layer of epoxy resin. This produces transformers suitable for damp or dirty environments, but at incréased manufacturing cost.