Operational factors are known to affect the health of an in-service power transformer and to reduce the capabilities and readiness for energy transmission and distribution. Hence, it is important to understand the degradation rate and corresponding behavioral aspects of different insulating fluids under various fault conditions. In this article, the behavior of mineral oil and two environmentally friendly fluids (a synthetic and a natural ester) are reported under arcing, partial discharges, and thermal fault conditions. Arcing, partial discharges and thermal faults are simulated by 100 repeated breakdowns, top oil electrical discharge of 9 kV for five hours, and local hotspots respectively by using different laboratory-based setups. Some physicochemical properties along with the gassing tendency of fresh and aged insulating liquids are investigated after the different fault conditions. UV spectroscopy and turbidity measurements are used to report the degradation behavior and dissolved gas analysis is used to understand the gassing tendency. The changes in the degradation rate of oil under the influence of various faults and the corresponding dissolved gasses generated are analyzed. The fault gas generations are diagnosed by Duval’s triangle and pentagon methods for mineral and non-mineral oils. It is inferred that; the gassing tendency of the dielectric fluids evolve with respect to the degradation rate and is dependent on the intensity and type of fault.