In hot and humid climates, a significant part of the energy is used to cool the building. There are several ways to reduce this air conditioning load, but one standout is through the selection and design of the right building envelope and its components. The thermal characteristics of the building envelope, in particular the thermal resistance of the insulation used, have an impact on the thermal and energy performance of building structures. Thermal conductivity, which indicates the ability of heat to move through a material given a temperature difference, is the primary factor affecting the performance of a thermal insulation material. Both temperature and humidity changes can affect a material's thermal conductivity value, which can then change. In fact, due to the fluctuating ambient air temperature and solar radiation, thermal insulation in buildings is susceptible to significant and continuous temperature variations. Thermal insulation used in building walls and roofs helps to reduce the energy demand of the building. It improves thermal comfort and, if used correctly, reduces the operational cost of the building. The present study has focused on the effects of location and insulation material on the energy performance of a residential building by considering five climatic locations in the Kingdom of Saudi Arabia (KSA). Five commonly used insulation materials with different thermal characteristics, namely polyurethane board (PU), expanded polystyrene (EPS), glass wool (GW), urea-formaldehyde foam (UFF), and expanded perlite (EP), were analyzed under various climatic zones as per the Saudi Building Code 601/602. The selected cities were categorized based on cooling degree days (CDD) and outdoor dry bulb temperature (DBT) as hot, very hot, and extremely hot climatic zones. Insulation improves thermal comfort and, if used correctly, reduces running costs. Experiments were conducted to determine the thermal conductivity, and the energy simulation was performed by employing IES-VE software for various insulation options. The findings indicate that the location has a significant impact on the energy performance of the insulating materials. The energy saving potential of polyurethane board (PU) insulation is more attractive in cities with higher DBTs and CDDs than in cities with lower DBTs and CDDs. The benefit of installing insulation ranged from a 2 to 14% decrease in energy demand for the climate zones studied. The sensitivity analysis showed that the energy saving potential of the insulation materials is sensitive to the set-point temperature (ST) band.