Thermally sprayed aluminum (TSA) serves as a protective barrier against both internal and external corrosion in a variety of hydrocarbon applications. Despite its efficacy, the degradation mechanisms of TSA, particularly in immersion scenarios and notably under thermal insulation, require comprehensive understanding. This study delves into the corrosion behavior of TSA using corrosion under insulation simulation setup, adhering to ASTM G189-07, and autoclave immersion. Corrosion tests, spanning three to four days under isothermal wet and cyclic wet conditions respectively, were augmented with linear polarization resistance tests to elucidate corrosion behaviors. The investigation involved meticulous microstructural examinations employing testing techniques such as confocal laser microscopy, detailed characterizations of microstructural features to comprehend 3D topography degradation, the utilization of scanning electron microscopy and energy dispersive spectroscopy. The findings revealed significant degradation of the TSA coating under insulation, attributed to the flashing of moisture and the active dissolution of iron at the insulation–metal interface. Unlike immersion conditions, the wear of TSA under thermal insulation resulted in crevices, fostering the active corrosion of the substrate steel. This nuanced exploration contributes to a more profound understanding of TSA’s behavior in complex environmental conditions.