The invention discloses a diagnosis method for the insulation state of a parallel compensation capacitor. The method is characterized in that the insulation state of the capacitor is judged by overvoltage time borne by a well element after the fuse of an inner fuse capacitor is fused. The method comprises the steps of obtaining the specific position of the element with the overvoltage after the fuse in a capacitor is fused according to the actual combination mode of a capacitor bank, then calculating the maximum overvoltage value borne by the element in the capacitor under the two conditions according to the specific structure of the capacitor, finally judging whether the insulation of the capacitor is tolerant according to the maximum voltage value, and thus judging whether the capacitor needs to be replaced. The maximum voltage threshold value in the diagnosis method for the insulation state of the parallel compensation capacitor is selected from the overvoltage value borne by the well element in the capacitor when the capacitance of the capacitor is reduced to be 95% (the alarm standard is achieved).