This study investigates the dynamic water injection process and insulation design of a thermal storage pit, analyzing the variation patterns of the flow field and temperature field inside the pit based on numerical simulation. The fluid dynamics characteristics of the pit during the water injection process under transient conditions were studied. It was found that the central region stabilized after 10 h of water injection, and the entire pit reached equilibrium after 20 h. The study shows that when the insulation material thickness is 0.1 m, the insulation material with a thermal conductivity of λ = 0.05 (W/m·K) provides significantly better overall insulation performance for the pit compared to materials with thermal conductivities of λ = 0.1, λ = 0.15, and λ = 0.2 (W/m·K). Moreover, the insulation performance of materials with thermal conductivities of λ = 0.1, λ = 0.15, and λ = 0.2 (W/m·K) is relatively similar. Additionally, emphasis should be placed on enhancing the insulation design of the pit wall at depths below 4 m and at the pit bottom to optimize heat retention performance.