The building construction sector accounts for over 34% of energy demand for the primary division and produces around 37% of CO2 emissions through energy use and processing (2022 Global Status Report for Building and Construction). Global warming and greenhouse gases trapped due to these emissions make climate change a major challenge for different agencies worldwide. Thus, it is vital to not only adopt the latest sustainable technology and construction methodologies but also improve the energy efficiency of existing buildings. This study explores the use of an insulation material layer between the walls and roof to decrease the annual energy consumption of the building. It aims to identify cost-effective alternative insulation materials that can be applied at an optimum thickness to achieve energy savings. A one-storey residential building located in Kolkata which has a warm and humid climate is considered in the study. The Design Builder energy simulation tool is used to estimate the energy consumption of each different combination of models. The study concludes that the optimum thickness should be 60 mm for both walls and roof, and the preferred material is extruded polystyrene. This change led to a reduction of 9.7% in annual energy consumption with a total cost saving of 6.56%. The cost–benefit analysis numerically helps to determine the long-term benefits of insulation materials considering market trends.