We insulate pretty well, our first overwinter we bought 2 "bee cozys" - expensive and very effective, both hives came through last winter with resources to spare.
On recommendation of an experienced friend, we also used a shallow super above the upper box, filled with wood shavings, we put a baffle below the shavings to keep them from falling through the inner cover hole, while still giving lots of room for damp air to exit. We also kick up the telescoping cover By 1/2" with a wood shim to ensure ventilation, I've seen others do that also. By spring last year the wood shavings had absorbed enough moisture that the bottom 2" was soaked. If we had insulated the sides only (meaning less condensation on the sides, more on the top), then it seems likely condensation would have formed on the inner cover, dripped on the colony and been a cooling hazard.
I believe condensation within the hive is an important water source for the colony in winter, in any case, our approach seemed to work well last year.
As we add more hives, we're going to use less expensive insulation, we like "reflectix", and we'll think to reserve the better (& more expensive) insulation for any hives that are less than optimally strong going into winter. We'd intended to go into this winter with 3 hives, and that was reduced to 2 when we lost a queen in October (we think she simply stopped laying at the end of her second summer). So far this winter, both hives are looking strong, we added fondant patties to the one that seems a little light on stores the warm Sunday before the anticipated cold snap, and looked in on them again yesterday, happy to find both hives looking strong.
Cutting a long story a little shorter, honeybees are very strong against cold and can survive much harsher winters than our area tend to throw, provided they have adequate stores to get through to spring. Some hives are still looking strong in say early March and can starve out in an April cold-snap.
Sadie