There are many initiators of transformer failures, but those which can potentially lead to catastrophic failure are:

1. Mechanical failure
2. Dielectric failure

In both cases, the transformer is no longer able to perform its intended function of carrying load and stepping down (or up) the voltage. The main point of concern in ageing and the life expectancy of transformers is the condition of the insulation system, which is typically based on organic products.The organic products in a transformer degrade over time and finally they lose the capability to withstand the stresses a transformer might see in daily life.

Some of the most common reasons are listed below :

-Lighting Surges
-Line Surges/External Short Circuit
-Poor Workmanship-Manufacturer
-Deterioration of Insulation
-Overloading
-Moisture
-Inadequate Maintenance
-Sabotage, Malicious Mischief

Transformer Failure appear in different ways, depending on the type of construction. Some modes of failure can occur regardless of construction type. These might include tap changer failures, bushing failures, tank failures, moisture ingress, and other forms of dielectric fluid contamination. Sometimes the failure could be purely due to lack of regular maintenance or lack of awareness. And sometimes it could be due to natural causes like lightning which causes electrical surge in the power lines. In more interesting fashion it sometime also happens due to snakes, squirrels etc.

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