Insulated covers that are designed to cover outside faucets are very common.
For inspectors they can eat up a lot of time getting them off to test the faucets. Some can be removed in a few seconds, but many have long threaded rods with wing nuts that must be unthreaded for an eternity to get them on and off. This is not a fun part of the inspection when it is 20 degrees outside.
It seems that the word about these covers has gotten out so well, that most people think that all outside faucets should have them. I find that I am just as likely to see them on faucets that are “frost-free,” as I am to find them on outside faucets that might freeze without them.
In modern construction all outside faucets should be frost-free type (if you live in an area where freezing can happen) and have an anti-siphon component as well. In this first picture we can see a cover that is poorly installed and that will not protect the faucet from freezing at all—–and this is a type that needs protecting.

Installing these covers on faucets that do not need them will not likely create any real problem other than annoy the inspector that has to take them all off to test the faucets—-and be a waste of money and natural resources. S
While the previous picture does nothing for the faucet and possible freezing of pipes, it did make a wonderful home for some lucky birds.

Another point to be made about outside faucets is that whenever possible non-frost-free type faucets should have an interior shut-off so that the section that runs to the outside can be drained of any water that is inside the pipe. Tiny leaks at either type of faucet can result in ice build-up “inside” the frost free type cover and the covers should be checked in freezing weather. This is another good reason to not use these covers on faucets that do not need them.
Charles Buell, Real Estate Inspections in Seattle
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How can you tell if your outdoor faucet is frost free or not? Mine definitely don’t have an interior shut-off. And one is leaking a little. Serious freezing weather is infrequent in my part of the Pacific NW and last year I just let the thing drip. There seems to be enough heat leaking out of the house (it is in the foundation wall) that it never freezes. What am I risking here?
Daniela, they do freeze very occasionally near the Sound—the higher the elevation the more likely they will freeze. It can be hard to tell if the faucet is frost-free type or not. It would be best to have it checked by a plumber—since it is leaking anyway. If the handle is perpendicular to the house wall (as opposed to at an angle) there is a good chance it is frost-free (but not always the case). If it drains for a few seconds after it is shut off, that would also be an indication that it is frost-free (but it might be installed wrong so that it cannot drain—and like you said yours is dripping already 🙂 ) If it has an integral anti-siphon device it is very likely it is frost-free type. If you send me a picture privately I can probably tell you (but not always).
Thanks. Now I remember that a plumber did look at the outdoor faucet on the other side of the house, and said that it was frost-free. So, I assume it’s frost-free, and if there’s a sudden unexpected freeze before a plumber gets to it, I guess it’s better not to have a cover on it. (?)