Microsoft for some unknown reasons after 35 years of consistent behavior decided to change the way the Insert key works in Word. Normally pressing the insert key toggles between Insert and Overtype. Most people live in Insert mode, but sometimes Overtype is nice, the engineers at Microsoft decided you no longer needed Overtype mode. Who knows why.
To fix it, head over to Word Options by clicking on the File or Office Button and click on Word Options. The photos are in Word 2010
Click on Advanced
Then locate the check box labeled "Use the Insert key to control overtype mode" Check that box, and click OK. That will enable the key to work, but you can't see what it's setting is yet.
To add the setting, right click on the Status bar, locate and click on the word Overtype.
Now the status bar will show the condition of the key, which is nice. You can also click on it to toggle between Insert and Overtype.
There you are back to how it worked for thirty some years. I wonder why they would disable that key. I've seen it moving around on some keyboards, which I don't care for, but to totally disable it in a word processing application where it's use is needed, seems odd.