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Thursday, June 10, 2010. Is very important to prevent any water from getting inside the insulation and causing any damage to it. If you fail to insulate the foundation properly it will potentially cause a lot of damage to the insulation. This will also reduce the efficiency of the insulation and prevent it from working efficiently. Step 1 - Preparing the Walls. Step 2 - Measuring Up. Another easier option would be to choose insulation materials which have waterproof membrane s.