Thermal insulation is one of the most effective energy conservation for the cooling applications. For this reason, determination of the optimum thickness of insulation and its selection is the main subject of many engineering investigations. In this study, the optimum insulation thickness on the external walls in the cooling applications is analyzed based on two different methods used to determine annual energy consumption. One of the methods is the degree-hours method (Method 1) that is the simplest and most intuitive way of estimating the annual energy consumption of a building. The other is the method (Method 2) which using the annual equivalent full load cooling hours operation of system. In this paper, a Life Cycle Cost (LCC) analysis is used to evaluate accuracy of these methods, and the results are compared. The results show that the life cycle savings are overestimated by up to 44% in Method 2, while the optimum insulation thickness and payback period are respectively overestimated by up to 74% and 69% in Method 1. Crown Copyright (C) 2012 Published by Elsevier Ltd. All rights reserved.