Cloth wiring was made by weaving cotton strands impregnated with rubber around electrical cables. Because it no longer meets fire safety regulations, it’s now considered a fire hazard.
There are a few reasons why cloth wiring is considered a fire hazard
Cloth wiring originated in the 19th century, well before plastic-coated wires were even invented. It used multiple layers of fabric over bare copper wires, which worked well as insulation.
The insurance policy for homes with cloth wiring depends on your state’s laws, your insurer, and your home inspection. Insurance companies may refuse to insure a home with cloth wiring, but policies largely vary among insurers.
Homeowners should carefully evaluate the safety risk involved with cloth wiring and decide to rewire accordingly. It is recommended to replace cloth wiring when possible.