Systems and methods are disclosed for on-line monitoring of the condition of the stator insulation of an AC motor or an electric generator. In certain embodiments, the system includes a transformer surrounding each pair of input and output cables associated with a given phase of power provided to the AC motor or generated by the electric generator. In another embodiment, a transformer surrounds the three input cables (for an AC motor) or the three output cables (for an electric generator) that correspond to phases of the AC motor or electric generator. In both embodiments, the transformers generate voltages that may be used to monitor leakage currents associated with the cables. A microcontroller monitors the voltages generated by the transformers and determines the condition of the stator insulation of the AC motor or the electric generator based on the voltages.