Optimization of various sub-systems is crucial in space craft’s design. Thermal insulation system on the outer surface of spacecraft requires great attention at the design stage, as it has to bear very high temperatures (around 1650o C) during orbiter re-entry. Thermal insulation is one of those aspects which proves to be principal for mission success. The focus of this study is to determine the optimized insulation system by considering the trending material, i.e., Silicon Carbide Foam (SiC). SiC is a porous material which can be sandwiched with the Silica (Si) Flexible Sheets, to form the Open Cell structure. In this study, thermal analysis of insulation is focused to form an economical alternative insulation system. This optimization includes multiple variables like cost, mass, volume as well as compactness. The mathematical model of heat transfer is solved considering Finite Element Analysis (FEA). In the results, optimum thickness of insulation was identified to be 0.079 m (at 0.8 open porosity) with greater emphasis on obtaining temperature gradient. The primary aim of this study is to design and optimize an effective insulation system from the economic aspect.