Lightning is considered one of the main causes of faults in overhead distribution networks. Direct strokes usually lead to flashovers due to the insulation levels that are used. Induced overvoltages caused by indirect lightning are usually lower and can be efficiently reduced by metal-oxide surge arresters. Hence, its associated flashover rate can be reduced. In this paper, a heuristic method is proposed to optimize the number of surge arresters as well as their locations. The method presented is based on genetic algorithms and an economic approach is taken into account by means of evaluating the cost of insulation flashover.