Arid and hot regions, like Saudi Arabia, utilize up to 60% of the country’s energy to regulate buildings’ indoor comfort. Energy efficiency is a long-term sustainability measure that is part of the government’s Vision 2030 strategy. A standard method of improving the thermal performance of buildings is through the use of insulation materials. Considering the cooling loads’ requirement and the Global Warming Potential (GWP), the present research evaluated the effectiveness of insulation materials, including extruded polystyrene, expanded polystyrene, rock wool, and glass wool in the hot, arid climate. For this case study, four similar villas facing the cardinal directions were selected from the residential project at Qassim University. HOBO data loggers were used to collect indoor temperature data. Thermal performance and Life Cycle Assessment (LCA) were conducted in accordance with Saudi Building Code-602 (SBC-602). Simulation outputs based on the four cardinal directions were used for assessing the thermal performance and LCA of the different thicknesses and densities of insulation materials. This was done using IESVE and SimaPro, IMPACR2002+, to assess their cooling load and GWP, respectively. The results suggest the potential for using lower insulation thickness for the northern and western façades without violating the SBC. The results obtained the actual thicknesses of the three insulation materials for achieving indoor temperatures in the four cardinal directions and the selection of materials and their densities along with associated GWP. The outputs of the study have been generalized in the form of a performance-based flowchart as a tool for selecting the type and thickness of thermal and environmental insulation in residential buildings in the Qassim region of Saudi Arabia.