The critical insulation radius is defined as the ratio of thermal conductivity to the convection heat transfer coefficient, determining maximum heat transfer in insulation systems. For radial systems like cylinders and spheres, the effective insulation radius alters heat transfer, with a critical point where added insulation can either increase or decrease total resistance and heat loss. In contrast, plane walls have a constant area for heat flow, leading to no critical insulation thickness, as total resistance always increases with additional insulation.