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Two popular types of chimney insulation exist. The most user-friendly is the chimney liner insulation blanket wrap kit. The blanket wrap is made of alkaline earth silicate, which is a high density insulation material and is U.L. listed. The blanket gets wrapped around the entire chimney liner length and adds to the diameter of the liner. Since it adds to the diameter of the chimney liner, this method is not always practical. Note: Never use standard fiberglass insulation because it’s not rated for very high temperatures.
If you have a small flue and cannot use the blanket wrap insulation, the chimney insulation pour-down mixture is your next choice. This is a vermiculite pour-down mixture that is mixed with water to then be poured down around the stainless steel chimney liner. The vermiculite insulation will harden after a week and provides as a zero clearance, U.L. listed insulation.
When purchasing a stainless steel chimney liner, chimney liner insulation will be a good addition to your investment.
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Source: Rockford Chimney Supply