In recent years, the use of biodegradable fluids as liquid insulation for distribution and power transformers is spreading. The main biodegradable fluids used are natural and synthetic esters, although biodegradable hydrocarbons have been recently proposed. Biodegradable fluids have a much lower environmental impact than mineral oil, limiting the risk of soil contamination in leaks, which makes them a suitable solution for applications such as offshore transformers or railway transformers. Additionally, these fluids have a higher flash point than conventional mineral oils, which dramatically reduces the risk of fire and collateral damage derived from explosion and fire. Despite these advantageous factors, there are still some aspects that hinder the broadening of their use, such as the difference in thermal properties or the lack of accepted maintenance procedures for transformers that use them as liquid insulation. This paper presents the current status of biodegradable insulating fluids, analyzing some of their properties and discussing the aspects that are still to be investigated in order to make them a real alternative to petroleum-based fluids.