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re-insulating an old furnace

We have an old home in New England and the original asbestos insulation was legally removed by the previous owner. I've insulated the steam pipes, but the furnace is bare.

Can an old cast-iron steam furnace be re-insulated safely or should I build a small furnace enclosure room to keep it from wasting heat into the basement?

I can't afford thousands for a new furnace, but the price of oil means I also can't afford to leave it as it is.

Thank you for all replies.

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