Isolated and insulated both come from Latin insula, island.
The Latin word insulatus, made into an island, became isolato in Italian and both insulated and isolated in English.
The two English words have different meanings:
Isolated means separated or set apart from others. You can be in a remote place without contact with anybody. Even with a lot of people around you at a party, you can feel isolated when you feel as if nobody notices you or makes contact with you.
You can also isolate something, identify, for example, a problem, in order to deal with it.
And scientists can isolate a virus from an infected host.
Insulated is used to indicate that something is covered or wrapped in a material that protects from loss of heat, an electric shock, etc.
Without being isolated, children that grow up with overprotective parents may be insulated against and unprepared for the harsh realities of life.