Functional - First layer of insulation
The functional insulation of a power tool means the electrical components in the interior of the power tool, as well as the cord, are totally isolated from each other as well as any metallic part that makes up the construction of the tool.
Protective - Second layer of insulation
The non-conductive outer casing of the tool is called the Protective Layer.
_________________________________________________________________________________________
The Department of Labor, Occupational Safety and Health Administration, answers the question:
How do I avoid power tool electrical hazards?
1. Use ground-fault circuit interrupters (GFCI) on all 120-volt, single-phase, 15 and 20 amp receptacles, or have an Assured Equipment Grounding Conductor Program. Use this link for more details (AEGCP).
2. Follow manufacturers' recommended testing procudure to insure GFIC is working correctly.
3. Use double-insulated tools and equipment, distinctively marked, whenever possible.
4. Use tools and equipment according to the instructions included in their listing, labeling or certification.
5. Visually inspect all electrical equipment before use. Remove from service any equipment with frayed cords, missing ground prongs, cracked tool casings, etc. Apply a warning tag to any defective tool and do not use it until the problem has been corrected.
6. A 3-prong plug should never be installed on a double insulated power tool cord.
This is tempting sometimes because that third post, the grounding post, helps hold the plug in the receptacle but take a minute to think about what it represents. If something electrical goes wrong on the jobsite everything will be looked at and someone will scream "release the hounds" even if your illegally grounded double insulated tool wasn't involved. You can run for the front gate if you like but it's pretty much guaranteed you'll eventually be caught and properly mauled.
7. FYI: Double insulated power tools were invented by Spencer Rees in November of 1969. Many other inventions have been patented by power tool manufacturers making the double insulated tool even safer.