How to Insulate Your Water Heater
Updated February 20, 2026
Cut your water heating bill by insulating the tank with a blanket and wrapping the first 6 feet of pipe -- a $20-50 project that pays for itself within a year.
Overview
Your water heater loses heat through the tank walls 24 hours a day, even when nobody is using hot water. That standby heat loss accounts for 10-15% of your water heating costs. An insulation blanket on the tank and foam sleeves on the first 6 feet of pipe cuts that loss by 25-45%, saving $30-50 per year. The whole project takes 30-60 minutes, costs $20-50, and pays for itself within the first year. Older heaters (pre-2000) benefit the most, but even newer ones are worth insulating if the tank feels warm to the touch.
What You'll Need
Safety First
- Gas heater: do not cover the top of the tank, the gas control panel, the burner access at the bottom, or the flue vent at the top. Blocking the air intake or flue creates carbon monoxide and fire hazards. Cut the blanket to clear all of these.
- Electric heater: do not cover the thermostat access panels on the side. You need those for temperature adjustment and element replacement. Cut the blanket to leave them exposed.
- Keep the thermostat at 120 degrees or below with a blanket installed. The blanket retains heat so well that higher settings can cause the T&P relief valve to discharge. That is a safety mechanism working correctly, not a malfunction -- but it means the setting is too high.
Step-by-Step Instructions
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Determine If Your Water Heater Needs a Blanket
Touch the side of your tank. Feels warm or hot? It is losing significant heat and will benefit from a blanket. Check the R-value on the data label (usually on the side). Below R-24? A blanket will make a real difference. Pre-2000 heaters typically have R-6 to R-16. Newer ones run R-16 to R-24. High-efficiency models at R-24 or above do not need one.
Tip: Even if the tank does not need a blanket, insulating the hot water pipes is still worth doing. Pipe insulation reduces heat loss during delivery and gets hot water to distant fixtures faster. -
Install the Water Heater Insulation Blanket
Blanket kits ($15-30) are sized for standard 40-60 gallon tanks. Wrap the blanket around the tank and mark where it overlaps. Gas heater: mark and cut out the gas control panel, burner access at the bottom, and leave the top completely uncovered (the flue exits there). Electric: cut out the thermostat access panels on the side. Use a utility knife or scissors. Wrap with the vinyl or foil side facing out and secure with the kit's tape (usually foil tape). Snug fit but not compressed.
Tip: Gas heater: keep at least 2 inches of clearance between the blanket and the flue pipe. The flue gets extremely hot and insulation must not touch it. When in doubt, leave more clearance. -
Insulate the Hot Water Pipes
Insulate at least the first 6 feet of both the hot outlet pipe and cold inlet pipe at the top of the heater. Pre-slit foam sleeves ($2-5 per 6-foot section) -- match the diameter to your pipe (1/2-inch or 3/4-inch for most homes). Slide on, close the slit, secure with foil tape every 12 inches and at joints. For best results, insulate all accessible hot water pipes in the house -- basement, crawl space, utility areas. Every foot of insulated pipe reduces heat loss and speeds up hot water delivery.
Tip: The cold inlet pipe benefits from insulation too. Heat from the tank conducts backward through it (thermosiphoning). Insulating that pipe cuts the backward heat loss. Newer heaters have built-in heat traps, but the insulation adds another layer of protection. -
Insulate Pipes in Vulnerable Areas
Beyond the heater connections, insulate hot water pipes running through unheated spaces -- basements, crawl spaces, attics, garages, exterior walls. They lose heat fast to cold air. Also insulate cold pipes in freeze-risk areas (exterior walls, unheated garages, crawl spaces). Foam gives some freeze protection for brief cold snaps but will not hold against sustained extreme cold. For elbows and tees, use pre-formed insulation pieces or cut and tape straight sections to fit.
Tip: High freeze risk (attics, exterior walls, unheated crawl spaces)? Foam alone may not be enough. Add electric heat tape (heat cable) under the foam insulation. The tape provides active heating in sustained cold, and the foam over it retains the heat and reduces energy use. -
Verify and Maintain
Check that the blanket is secure with no sagging. Gas heater: verify vents and access panels are still clear. Run hot water at a distant fixture -- you should see faster delivery. After 24 hours, check water temperature with a cooking thermometer at a faucet. Should be close to 120 degrees. Significantly hotter? The blanket is retaining more heat than expected -- lower the thermostat by 5 degrees. Inspect the blanket and pipe insulation annually for damage, moisture, or pests.
Tip: Damp basement or crawl space? Condensation can form on cold pipe insulation. Normal, but it drips. Use insulation with a built-in vapor barrier (foam wrapped in plastic or foil) or seal the seams of standard foam with foil tape to create your own.
Pro Tips
- The DOE estimates a blanket saves 7-16% on water heating costs, paying for itself in under a year. One of the highest-ROI energy upgrades for any home.
- Have a recirculation pump? Pipe insulation is even more critical. Without it, the recirc loop acts as a radiator, constantly bleeding heat into the air. Insulating the entire loop dramatically reduces that waste.
- Do not use fiberglass on pipes that may have condensation (cold pipes in humid areas). Fiberglass absorbs moisture and loses its insulating value. Closed-cell foam does not absorb water.
- Best combo for an older heater: blanket on the tank, foam on all accessible hot water pipes, and thermostat down to 120 degrees. Together, those three changes can cut water heating costs 20-30%.
- Water heater in an unheated garage or basement where temps drop below 40 degrees regularly? The blanket is especially valuable. The colder the surrounding air, the harder the heater works to maintain temperature.
When to Call a Pro
This never requires a professional. But if the T&P valve starts discharging after you add the blanket (water dripping from the discharge pipe), lower the thermostat 10 degrees. If it continues, remove the blanket and call a plumber -- there may be a thermostat issue unrelated to the insulation. If you are unsure about gas vent and burner clearances, check the manufacturer's documentation or have a plumber verify.