Advantages
When originally installed in the early 1900s, K&T wiring was less expensive than other wiring methods. For several decades, electricians could choose between using K&T wiring, compared to conduit, armored cable, and metal junction boxes. The conduit methods were known to be of better quality, but their cost was significantly higher than that of K&T. In 1909, flexible armored cable cost about twice as much as K&T, and conduit cost about three times the price of K&T. Knob and tube wiring persisted since it allowed owners to wire a building for electricity at lower cost.
Modern wiring methods assume two or more load-carrying conductors will lie very near each other, as for instance in standard NM-2 cable. Since the load-carrying wires are in close proximity, when they heat up, the heating is shared across the wires, limiting the overall current load they can support. Since the load-carrying wires in K&T wiring are widely spaced, the wires are capable of carrying higher currents than the same conductors in close proximity. When installed correctly, the K&T wires are held away from the structural materials by ceramic insulators.
K&T wiring was commonly insulated with cotton cloth and soft rubber, in addition to the porcelain standoffs. Although the actual wire covering may have degraded over the decades, the porcelain standoffs have a nearly unlimited lifespan and will keep any bare wires safely insulated. Today, porcelain standoffs are still commonly used with bare wire electric fencing for livestock, and such porcelain standoffs carry far higher voltage surges without risk of shorting to ground.
In short, K&T wiring which was installed correctly, and not damaged or incorrectly modified since then, is extremely safe when used within the original current-carrying limits.
Read more about this topic: Knob And Tube Wiring
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