This review paper explores the integration of phase change materials (PCMs) in building insulation systems to enhance energy efficiency and thermal comfort. Through an extensive analysis of existing literature, the thermal performance of PCM-enhanced building envelopes is evaluated under diverse environmental conditions. This review highlights that PCMs effectively moderate indoor temperatures by absorbing and releasing heat during phase transitions, maintaining a stable indoor climate. This paper also delves into the detailed concepts of PCMs, including their classification and various applications within building insulation. It is noted that different types of PCMs have unique thermal properties and potential uses, which can be tailored to specific building requirements and climatic conditions. Furthermore, cost–benefit and environmental assessments presented in the reviewed studies suggest that incorporating PCMs into building materials offers significant potential for reducing energy consumption and mitigating environmental impacts. These assessments indicate that PCMs can lead to substantial energy savings by decreasing the reliance on heating and cooling systems, thereby lowering overall energy costs and carbon emissions. However, despite the promising outlook, this review identifies a need for further research to optimize PCM formulations and integration methods. This optimization is essential for overcoming current challenges and facilitating the widespread adoption of PCMs in the construction industry. Addressing issues such as long-term durability, compatibility with existing building materials, and cost-effectiveness will be crucial for maximizing the benefits of PCMs in enhancing energy efficiency and sustainability in buildings. Overall, this review underscores the transformative potential of PCMs in building insulation practices. By providing a comprehensive overview of PCM classifications, applications, and their impacts on energy efficiency and environmental sustainability, this paper lays the groundwork for future advancements and research directions in the field of PCM-enhanced building technologies.