Knob and tube wiring gets its name from the way it's installed. There are ceramic tubes for wires that run through any lumber framing and knobs when the wires run along or next to lumber framing. The two wires (there is no ground wire) are separated about four inches apart, one is the black "hot", and the other is the white "neutral" (although some knob & tube wires are not different colors). The connections for knob & tube wiring are open and visible. The wires are spliced and soldered together with older style fibrous electrical tape around the splices. Knob & tube wiring was installed in houses up until about 1945, although in rural areas until about 1950.
As I stated, knob and tube wiring does not have a ground wire. A ground is necessary if you are plugging in appliances that have a third prong in the plug. However, if the knob and tube wiring is limited to bedrooms, living room, dining room, etc, this is not necessarily a hazard. Plugging in a two prong lamp, TV, or clock is just as safe as a three prong grounded outlet.
Knob and tube wiring is not necessarily dangerous. If it was installed properly, with the insulation in good condition and not abused with over splicing and connections, it can provide many more years of reliable service. It is wiring that has been abused that is the potential hazard. On its own, knob & tube wiring is not inherently a problem. If the knob & tube wiring is on top of the attic floor, it could be easily nicked or the insulation could be worn off, causing a safety hazard. If the knob & tube wiring is in a traveled area, even for "just storage", I highly recommend it be protected or replaced.
Although knob & tube is a workable system, and completely safe when installed and used properly, there are some concerns with this system:
There's no ground wire(for more modern lifestyle requirements and safety)
A fear exists that the black and white wires can make contact (a potential fire and safety hazard).
The rubber and cloth insulation around the knob & tube wiring breaks down over time and becomes brittle (a potential fire and safety hazard).
It would be too costly to maintain or even install this type of wiring today.
More importantly perhaps, some insurance companies are now refusing to provide home owners insurance on houses with existing knob & tube wiring.
It can not be run in or under insulation. This often happens when outside walls or attics are insulated. Old wiring was installed in open spaces so that it would stay cool. The insulation around the wires was made of rubber that burns at a relatively low temperature. If surrounded by house insulation, the wires will not cool and could heat up enough to burn. It is important that if an old house is to be insulated that any knob and tube wiring be re-wired first.
Many things that we plug in have a three prong plug. The large round prong is the ground. Those little three to two prong adaptors bypass the ground safety circuit. This is a particularly bad idea if you are plugging in a computer because computers dissipate harmful static electricity through the ground wire. Without a true ground, you're putting yourself and your equipment at risk.
Using knob and tube wiring for wall outlets is where hazards are more likely to occur. Everyday items in the bathroom can quickly overload a 15 amp circuit. A 1500 watt hair dryer and a 300 watt curling iron plus a light bulb exceed 15 amps.
A cost effective strategy in old homes is to abandon any of the electric outlets wired with knob and tube and have new grounded outlets installed with modern wiring and keep the current knob and tube overhead lighting wiring in service. However, I still recommend eventually updating and replacing this old wiring due to issues that I have already discussed.

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David
You can see some of my thoughts on K&T here:
http://activerain.com/blogsview/79330/Knob-and-Tube-wiring
Thanks for posting. I am still continuing to educate myself on K&T as it's common in old Toronto homes. I know that in Toronto, some insurance company is willing to insure knob and tube homes under a certain percentage (5-20%). Some home inspectors and insurance companies also recommend getting a certification from the ESA to certify the old wiring is still safe to use.
Hello Anne,
Yes, you are absolutely correct. On its own, knob and tube wiring is not inherently a problem. It's the insurance companies that are the problem in this case. They all fear that a fire will result from a K & T installation.
If the knob and tube wiring is on top of the attic floor (which most are not), it could be easily nicked or the insulation could be worn off, causing a safety hazard. If the knob and tube wiring is in a traveled area or even in an area for "just storage", I highly recommend that it be protected or replaced.
David Valley
Massachusetts Home Inspections
Massachusetts Infrared
I have had clients that had trouble getting homeowners insurance because of knob and tube wiring.
Liberty Mutual will insure most homes with knob and tube wiring. But it's been hit an miss.
David
David,
If an insurance company does insure a home with Knob & Tube wiring, Im willing to bet that the premiums will be inflated.
Very informative! Thanks for posting.
Thank you, David. I'm glad you found this information very informative.