John in Kleinburg, Ontario asked if he should remove insulation from around his pot lights. Actually it is necessary to take the question much further.
Pot lights, or recessed lighting fixtures as they are properly called, do create a lot of heat and it is true that if traditional pot lights are buried in insulation they could cause a fire. Removing the insulation would just make the metal casing freezing cold when they were not on. During that time, they could be collecting frost from the household moisture. Turn on the light and it drips onto the ceiling or the floor or both.
Another problem is that they have many holes and unsealed seams, so they are permitting moist air from the house to flow almost freely into the attic, wasting much energy, often creating Ice Dams on the roof by melting the snow from below, and certainly collecting large quantities of condensation and frost inside the attic, possibly rotting out the roof deck. When you turn on the light, the added heat actually pumps this household air into the attic or roof space even faster. Bad stuff. In fact you can often identify the location of pot lights by looking for large icicles on the roof edge outside.
For a while it was recommended to build a box of plywood or cardboard around the pot light to block all of this and give an air space to keep things cool, allowing piling insulation over the top. The problem with this box is that many of them caught fire themselves. So for a while we just said, "No recessed light fixtures at all in an insulating ceiling."
Then the lighting companies started making double shell "IC" recessed lighting casings designed to keep everything away from the hot inner casing. This allowed putting insulation directly over the unit. But they were still full of holes and still caused heat loss and moisture problems.
The photo shows a special recessed light made by Juno called an Air-Loc light. The inner box is constructed air tight. The outer box holds insulation, wires, or anything else away from the hot inner casing, permitting putting the insulation directly over the unit. The important detail, that is often overlooked by consumers and electricians alike, is the self adhesive gasket that seals the inner casing to the drywall, and covers the last of the air leak holes. That is why they call it Air Tight Ready, not just Air Tight. It is not Air Tight until you put the gasket on properly.
This is the only type of fixture that will allow you to have recessed lights in an insulated ceiling without fire, heat loss or moisture problems. They even make a smaller unit designed for renovation that will slip into the existing ceiling cut-out if you cannot work from above.