This is an interesting photo in that there are two problems, or at least possible problems. The knob and tube wiring, which had been modified in various places, is the most obvious problem. Some insurance companies will still cover knob and tube wiring (with a higher premium) but many of the most affordable insurance companies will not even consider insuring a house with knob and tube wiring. A primary risk is fire, and also the system has no equipment ground. The other possible issue in the photo is vermiculite attic insulation. It could be okay, but based on the age of the house, it is likely that this contains some asbestos fibers. The basic guideline is to leave it undisturbed. Some people prefer to have it tested and, if it has asbestos in it, they want it removed which can be costly. For more information on vermiculite, check this blog by Charles Buell.
Steven L. Smith
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Tracy,
The knob and tube wiring is more age related than state related. It was very early wiring and was pretty much phased out in the late 1940's. As for the vermiculite, the main that came from was in Montana, so there might be more here on the west part of the country. However, they caught on that it might be a problem so, again, it is largely age related.