Cellulose insulation provides excellent insulation and sound insulation qualities, as most insulation, can sustain water damage. Unfortunately, once the effects of water damage, you must remove the insulation to prevent further structural damage.
The most obvious sign of water damage is the flaccidity and deformation of wall coverings. While cellulose can absorb water up to a certain point before fiber saturation occurs, this can be detrimental to the most vulnerable coatings that need replacing once wet.
Because cellulose insulation absorbs water and falls under weight, water damage can lead to reduced ratings. The clearances create gaps and holes that allow the heat to escape, limiting its insulating properties.
Increased fire risk
Cellulose insulation contains boric acid as a fire retardant. Over time, however, repeated exposure to water damage can clear up this chemical component and leave insulation vulnerable to fire.
Corrosion and structural damage
The chemicals used to treat cellulose insulation are corrosive when wet and are fed through electrical wiring, plumbing, and compatible with metal ceiling like nails and screws.
The only signs of water damage that cellulose seems to escape are fungus and mold. Boric acid is a natural antimicrobial compound that prohibits the growth of fungal spores.