Minor physical damage can reduce the insulation performance of epoxy resin, which seriously threatens the reliability of electrical equipment. In this paper, the epoxy resin insulating composite was prepared by a microcapsule system to achieve its self-healing goal. The repair performance to physical damage was analyzed by the tests of scratch, cross-section damage, electric tree, and breakdown strength. The results show that compared with pure epoxy resin, the composite has the obvious self-healing performance. For mechanical damage, the maximum repair rate of physical structure is 100%, and the breakdown strength can be restored to 83% of the original state. For electrical damage, microcapsule can not only attract the electrical tree and inhibit its propagation process, but also repair the tubules of electrical tree effectively. Moreover, the repair rate is fast, which meets the application requirements of epoxy resin insulating material. In addition, the repair behavior is dominated by capillarity and molecular diffusion on the defect surface. Furthermore, the electrical properties of repaired part are greatly affected by the characteristics of damage interface and repair product. In a word, the composite shows better repair performance to physical damage, which is conducive to improving the reliability of electrical insulating materials.