Loft insulation is a barrier of material within your roof space. It can either be laid between the joists (the horizontal beams along the floor of your attic) or the rafters (the angled beams that support the roof).
Either way, it slows down the transfer of heat between your living space and the outside world, creating a warmer home in winter and a cooler one in summer. Insulation between the joists keeps warmth in your living space below and creates a cold loft, while insulation in the rafters allows you to keep warmth in the roof space as well.
