Knob and Tube Wiring
As existing Knob and Tube (K& T) wiring gets older, insurance companies may deny coverage due to a perception of increased risk. Several companies will not write new homeowners policies at all unless all K&T wiring is replaced, or an electrician certifies that the wiring is in good condition. Also, many institutional lenders are unwilling to finance a home with limited ampacity (current carrying capacity) service (which, as noted above, often goes hand-in-hand with K&T wiring), unless the electrical service is upgraded.
It is usually easily seen in unfinished basements by the Cermamic knobs and tubes used. Knob and tube wiring was eventually displaced from interior wiring systems because of the high cost of installation compared with use of power cables, which combined both power conductors of a circuit in one run (and which later included grounding conductors).
Many home owners have removed visible knob and tube from their basements, as some insurance companies felt the old exposed wiring was unsafe. However removal of knob and tube from within walls and ceilings throughout a house is often not completed do to its expense. As well some insureace companies only require removal of exposed wiring.
I have seen some home owners run steel armoured BX conduit outside of walls to replace knob and tube. While this may provide a ground, it is unattractive.
Another way of recognising the potential presence of knob and tube wiring in a home is two prog plug receptacles. As knob and tube never had grounds, older plug receptacles had only 2 sockets without a ground.
The absence of a ground path can lead to a electrical shock. For example a metal light fixture could become energized on its exterior, and the lack of grounding will not allow the breaker to trip.
In some cases the wiring is grounded and they just didn’t put three prong plugs, because they were cheaper. In many cases there is no wire, or other grounding path.
The reason that this is legal is because the GFI receptacle can detect minute levels of leakage current, and open the circuit. In fact it does it a lot faster than the breaker would. This is why they are required near sources of water, or outside.
There used to be a time where someone would grab a drill while standing in a puddle and get killed. With a GFI, they wouldn’t even feel a tingle. It would instantly shut off power.