Pipe insulation is too often overlooked by homebuilders. Some shady contractors wishing to cut corners in order to keep the bottom line low for their clients will leave out these infrastructural options too often, but pipe insulation is essential for the performance and long service-life of piping systems. So it is often these kinds of additions that homeowners will want to consider themselves.
Frozen Pipes
Naturally, pipe insulation is most important in areas where there is the potential for pipes to freeze and burst. The cost of both piping and insulation is tiny relative to the damages when a pipe breaks. While it is obvious that outdoor pipes (under the porch, etc) need to be insulated, other pipes can still freeze even if they run in a temperature-regulated part of the house. Things happen, electrical power goes down for several hours, or you go on vacation and don't expect the temperature to drop as much as it does. Proper pipe insulation can reduce, if not eliminate, the chance of your pipes freezing.
Pipe Insulation, Energy Costs, and Water Damage
Insulation has a tremendous impact on your home's energy use. With rising energy prices, as well as environmental concerns, it is becoming even more important to pay attention to how you consume energy. Proper insulation improves the thermal efficiency of your home, limiting heat transfer and providing a vapor barrier against moisture. Proper piping and insulation materials also eliminate condensation formation, which accelerates pipe deterioration.
Insulation Materials
The biggest problem with insulation is keeping it from getting wet. The most commonly used insulation has moved from mineral and fiberglass to include flexible and rigid closed-cell glass materials. These newer materials block the moisture that can collect in traditional fiberglass insulation. Another system for water pipes uses a wicking wrapped around the piping that absorbs moisture and carries it outside of the jacket, where it evaporates. For underground pipe insulation, the newest insulation is made from polyurethane foam, which limits the impact of water and is an excellent insulator. 
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