The rim joist — the band board closing the ends of the floor joists — sits directly on the foundation, is exposed to outdoor air across its full thickness, and is riddled with the gaps where joists, subfloor and sill plate meet.
It is a small area doing an outsized amount of damage.
Why batts fail here
A fiberglass batt stuffed into a rim joist bay does not stop air. Warm humid indoor air passes straight through it, reaches the cold band board behind, and condenses there.
The insulation then holds that moisture against the wood. Rim joists insulated with batts are one of the most reliable places to find rot and mold in an otherwise dry basement, and the batt hides it.
Fiberglass is a filter, not an air barrier. In an assembly where the cold surface is right behind it and the air can get there, that distinction decides whether the wood survives.
What works: rigid foam, sealed
Cut rigid foam to fit each bay — 2 inches of XPS or polyiso gets most climates to code — press it against the band board, and seal the perimeter with canned foam.
The foam board is the insulation. The sealed perimeter is the air barrier, and it is the part that matters. Air cannot reach the cold surface, so nothing condenses there.
Two inches of polyiso is about R-13; 3 inches gets to R-19 for colder zones. IECC treats the rim joist as part of the wall, so the wall R-value for your zone is the target.
What also works: closed-cell spray foam
Two inches of closed-cell foam does insulation, air barrier and vapor retarder in one pass, and it conforms to the irregular geometry that makes rim joists tedious to cut for.
It is the faster answer where there are many bays, and the more expensive one for a handful.
What not to do
Do not put a polyethylene vapor barrier over batts here. That traps any moisture that does get in, against the wood, permanently.
Do not skip the perimeter seal on foam board. Foam board cut slightly small and left unsealed performs like a batt, because the air simply goes around it.
Do not insulate over existing rot. Probe the band board with a screwdriver before covering it. Soft wood at the sill is a structural repair, not an insulation project.
Where it sits in the priority order
For a house with an uninsulated rim joist and a code-compliant attic, the rim joist is the better investment — a small material cost against an assembly that is currently at roughly R-3.
It also tends to be the largest single air leak in a basement, which means the return is bigger than the R-value change alone suggests.