In residences, exhaust fans are typically seen in two primary locations: the kitchen and the bathroom. In the kitchen, the fan removes the smoky, greasy air generated from cooking and channels it away. In bathrooms, the fan takes away the moist air and moves it away before the moisture can damage the bathroom. In either case, insulation materials should never get in the way of a fan performing its work.
Insulation, like matting, will stop the fan from successfully drawing up and removing air if it is put over the fan opening or venting. Fans are designed to remove a certain amount of air within a specific time. Insulation drastically lowers that necessary airflow. As a result, moisture and grease pile up in unwanted areas of the home. This causes damage, rot and mildew, and also encourages pests. Always clear away any insulation from exhaust fans so they operate correctly.
Insulation can cause other problems in addition to reduced airflow. Matting may break apart and pieces might be lost in the fan, which can cause clogs that have to be removed. Too much insulation can also obscure the fan and make it difficult to find in the crawlspace for any additional work.
Your exhaust fans should always vent to outside air, either through one of your walls or through the roof. If insulation is covering your exhaust vent out, then you have an even more serious issue: Your fan is venting into your attic or crawlspace, trapping the moisture. Immediately remodel to move the vent to outside air to avoid serious leaks and mold problems.