when cables are surrounded by insulation, the heat generated by the current they carry cannot escape, and they can overheat which (at least) shortens the life of the PVC insulation. This is particularly important with the cables to electric showers and immersion heaters which will be carrying sustained heavy loads. Lighting cables in a house have very low loads.
However:
If the cable is exposed on one side (e.g. it lies on top of the insulation), or if it is in contact with an uninsulated surface (e.g. it is lying on the ceiling) the heat can escape so this is not a problem.
If you have any downlighter/spots in the ceiling, they are a particular risk and you should protect them with fire hoods or other non-flammable covers so the insulation can't flop onto them.
Loft insulation is cheap and gives good heat insulation. Because it is very light it muffles sound a little, but heavier insulation is better. You can get slabs of mineral wool as used in cavity walls fairly cheaply, or purpose-made sound insulation quilt which will be dearer. mineral fibre teated with Ecose does not shed irritant dust and fibre like the old yellow fibreglass (it is brown, and widely sold as an own-brand or as Knauf, you will see the "Ecose" name on the packaging).
If you squash loft fibre tightly around the perimeter of the room, it will block draughts which usually come from gappy brickwork and the holes that joists are built into, and rise up under the shorting and though gaps in floorboards.
mineral fibre does not damage cables as plastic foam can, and does not burn or create poisonous fumes in a fire, as plastic foam does. Since Grenfell I would not have plastic foam in my house.
here's one I did earlier:
