Two Slot Receptacles - Ungrounded receptacles with only two slots can only receive two-prong plugs. It is clear that the circuit and appliance are not grounded.
Box Not Grounded - There is a safety issue if the box itself is not grounded, as was a common installation practice until the early 1960s. If a hot wire or terminal from the outlet contacts the metal box, the live box becomes a shock and fire hazard.
Three-Slot Receptacles On Ungrounded Circuit - Ungrounded outlets create another safety issue if the old two-slot receptacle is replaced with a modern U-ground receptacle (with a third slot for the ground pin). These are often installed in old houses where there is no ground wire in the branch circuit wiring. A false sense of security is created since the outlet looks grounded, but is not.
There are several ways to deal with this condition: Provide a ground wire for the receptacle. It may be connected to a nearby water pipe or may be carried right back to the panel. Replace the outlet with a GFCI receptacle. Replace the outlet with a two-slot receptacle (if available). Fill the ground hole with epoxy or a pin designed for this purpose, so a grounded appliance can't be plugged in. (Not permitted in many areas.)
Ground Fault Circuit interrupter (GFCI) Instead Of Grounding - This has some disadvantages because it is not as good as grounding, in some respects. If you plug in a power drill (with a grounded three-prong plug) and the hot wire inside the drill touches the metal case, the case will become live. When you pick up the drill, you will get shock. If the ground pin in the drill plug was connected to a house ground system, you would not have gotten a shock.
However, while you'll get a shock, it will only be for a very brief interval, since the GFI will sense the imbalance in the circuit (as electricity flows through the black wire, through you into ground, but not through the neutral wire) and the breaker will trip. With a GFCI you'll get a brief shock. With a grounded outlet you would not get a shock at all.
Ground Only Old Outlets Where Needed - In practice, very few people ground their receptacles in an old house unless there is an appliance that relies on grounding. Any appliance with a three-prong plug relies on grounding. Home computers, for example, dissipate static charges through the ground wire. The GFCI solution will not be helpful here. You need to ground the outlet.
Double Insulated - Consequently, many appliance manufacturers gave up on grounded plugs, succumbing to the reality of the marketplace. Appliances that are not grounded are now often double insulated to provide additional protection. This means that the outer casing is electrically isolated from the inner casing. If wires get loose inside an appliance, they may contact the inner case, but not the outer case. There should be nothing people can touch on the outside of the appliance that could ever become electrically conductive. This is not grounding, but it does isolate the person from the problem, if all goes well.
It's usually recommended that you contact a Licensed Electrical Contractor for an evaluation and repairs.
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