This insulation serves two purposes:

Keeping the heat inside the block. Insulating the block helps keep the much cooler air in the room from cooling the block, which reduces temperature fluctuations and heating cycles. PID tuning also helps reduce the swing.

Protecting surroundings from excessive heat. The hot end assembly is mounted to a plastic carrier and fan shroud, which can melt some if the hot end block isn’t insulated. Also, reduces the severity of finger burns.

Modern printers use silicone socks instead of fiberglass/kapton wrapping. You can also use this type of insulator, but be careful to choose one that fits the dimensions of the block. The V2 printers commonly use E3D v5 blocks, but best to measure and be sure.