Acute exacerbations of chronic obstructive pulmonary disease (COPD) with severe hyperglycemia may require insulin to lower glucose levels in people with coexisting type 2 diabetes (T2D) and COPD. We conducted this study to examine the risk of hospitalization for COPD, pneumonia, ventilator use, lung cancer, hypoglycemia, and mortality with and without insulin use in people with T2D and COPD. We adopted propensity-score-matching to identify 2370 paired insulin users and non-users from Taiwan’s National Health Insurance Research Database between 1 January 2000 and 31 December 2018. Cox proportional hazards models and the Kaplan–Meier method were utilized to compare the risk of outcomes between study and control groups. The mean follow-up for insulin users and non-users was 6.65 and 6.37 years. Compared with no insulin use, insulin use was associated with a significantly increased risk of hospitalization for COPD (aHR 1.7), bacterial pneumonia (aHR 2.42), non-invasive positive pressure ventilation (aHR 5.05), invasive mechanical ventilation (aHR 2.72), and severe hypoglycemia (aHR 4.71), but with no significant difference in the risk of death. This nationwide cohort study showed that patients with T2D and COPD requiring insulin therapy may have an increased risk of acute COPD exacerbations, pneumonia, ventilator use, and severe hypoglycemia without a significant increase in the risk of death.