Due to the economic and environmental concerns associated with fossil fuels, many government and private organizations are progressively shifting towards the integration of solar farms with Utility Grids. However, these systems are facing insulation failure issues due to internal and external transient overvoltage’s, in which their shape, magnitude, and duration are unpredictable, and consequently, the insulation stress also becomes unpredictable. To ensure the safety and integrity of the system against any transient overvoltage event, it is important to carry out an insulation coordination analysis. The primary goal of this research work is to achieve this optimization in an economically viable manner, ensuring both operational stability and cost-effectiveness in the design of electrical equipment like surge Arresters. The research work presented in the literature does not fully evaluate all International Electrotechnical Commission (IEC) overvoltage classes as specified in the insulation coordination standards for Utility Grids integrated with solar farms. Therefore, this research paper investigates the impact of various transient and switching overvoltage conditions, as defined in the IEC 60071.4 Insulation Coordination Standard at the Solar and Utility Grid Electrical power system using PSCAD 4.6/EMTP Software. Five distinct simulation scenarios were developed to assess the systems’ resilience against insulation stress events. The proposed system was also examined with and without the application of a lightning surge arrester.