In response to the typical decay and fracture defects of composite insulators, a three-dimensional electrically and thermally coupled simulation physical model was constructed based on the finite element method, and the local electric field distortion and temperature rise were analyzed. The study confirms that the insulator interface’s axial electric and thermal fields show a U-shaped curve; the interface field strength is the largest. There is an electric field gradient difference between the mandrel and the sheath, and the thermal field is concentrated at the mandrel and the interface. The field strength at the edge of the defect is the largest, the aberrant electric field at the defect shows a sawtooth shape, and the temperature rise is concentrated in the defect area. The degradation is fast in the air gap, the etching hole diameter direction, and the carbonation channel axial direction. The larger the defect volume, the larger the aberration in the electric field and temperature rise. Water vapor air gaps, breakdown holes, and carbonized channels have the most pronounced electric field and temperature changes. The functional relationship between electric field aberration, temperature rise, and defect volume is established. The results provide a basis for the protection of insulator decay-like fracture.