The photo below, from a recent home inspection, is a classic example of the attic insulation being poured in around old knob and tube wiring. Knob and tube wiring, at least in the modern day, is problematic even at best. Many insurers do not want to insure homes with old knob and tube wiring and those that do will ask a premium price. Another problem is the circuits do not have the third wire -- the equipment ground that we all take for granted today. While it is on a case by case basis, the biggest problem I find is the way it has been hacked up. People cut into it, twist it back together with Romex or newer cable and seem to never give a thought to putting splices in junction boxes. Sometimes they do not even bother with wire nuts. When knob and tube wiring is found by the home inspector it should be called out. Sometimes, depending on accessibility, it can be difficult to determine for sure if knob and tube is active or not. Much of it might have been replaced but nobody bothered to replace it at ceiling light fixtures or in wall cavities. Two prong outlets, or three-prong outlets that test as not having the equipment ground, are big clues that it is still in service. 

Thanks for looking.

Steven L. Smith

Bellingham home inspector