Choosing a New Water Heater: A Guide

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Is Tankless Right for You?

This happy woman demonstrates the benefits of a point-of-use tankless water heater.
Kevin Fitzgerald/Getty Images

Tankless water heaters are becoming increasingly popular in the US as a viable alternative to traditional storage tank models. Unlike stored tank heaters, tankless units heat water only when required. When you turn on the hot water tap, an electric or gas-powered heat exchanger quickly heats the water to the desired temperature. Point-of-use models are designed for one or two fixtures, whereas whole-house units can handle all your water heating needs. Point-of-use models are small and can be installed under a cabinet or in a closet. Whole-house units are wall mounted, saving valuable floor space. To learn more about how tankless heaters work and how to choose the right size for your needs, read How Tankless Water Heaters Work.

Tankless heaters offer many benefits. Most models come with a federal tax rebate of $300 and are more efficient than storage tank heaters, potentially reducing your water heating bill by up to 20% [source: Energy Star]. As tankless heaters heat water as it flows, you’ll never run out of hot water. They are also longer-lasting than storage tank heaters, lasting between five and ten years more. Electric models are environmentally friendly as they don’t produce greenhouse gases and there’s no risk of flooding due to a ruptured tank.

That said, there are also downsides to tankless heaters. Natural gas whole-house units can cost up to three times as much as conventional heaters. Although you’ll have an unlimited supply of hot water, there are limits on volume because the output is split between all of your fixtures. Some homes may require a larger natural gas line to supply the unit with enough fuel, adding to the cost. Venting gas or propane models with stainless steel tubing can also add to the expense. Electric units may require an additional power circuit. Gas models, in particular, produce greenhouse gases and require annual servicing. The time it takes for hot water to travel from the heater to your faucet can increase water waste.

Whole house electric models cost between $500 and $700, which is comparable to similar storage tank models. Gas models, on the other hand, have a much larger price differential. A whole-house gas tankless heater can cost as much as $2,000, whereas a storage tank counterpart runs about $450. Tankless heater installation is usually more expensive too.

In order to decide which type of heater to choose, add up the total cost of purchase and installation for the heaters that meet your needs. Then compare that to the efficiency rating on the yellow Energy Star label. The time it takes to recoup the additional expense of a tankless heater is called the payback period. It’s important to note that storage tank heaters will need to be replaced every 10 years, whereas tankless models can last for up to 15-20 years.

Next, we’ll discuss how to choose the right size water heater for your home.


1. What are the different types of water heaters?

There are several types of water heaters to choose from, including tankless, storage tank, heat pump, and solar. Tankless water heaters heat water on demand and are more energy-efficient than storage tank heaters. Storage tank heaters are less expensive but have a limited supply of hot water. Heat pump water heaters use electricity to transfer heat from the air or ground to heat water and are very energy-efficient. Solar water heaters use the sun’s energy to heat water and are also very energy-efficient but can be expensive to install.

2. How do I determine the right size water heater for my home?

The size of your water heater depends on the size of your home and your hot water needs. A general rule of thumb is to have a water heater with a capacity of 10-15 gallons per person in the household. You’ll also need to consider the peak demand in your home, such as when multiple people are showering or using hot water at the same time.

3. What is the most energy-efficient type of water heater?

The most energy-efficient type of water heater is a tankless water heater. They only heat water as it’s needed, which reduces standby heat loss and saves energy. Heat pump water heaters are also very energy-efficient, as they use electricity to transfer heat rather than generating heat.

4. What is the average lifespan of a water heater?

The average lifespan of a water heater is 8-12 years. However, this can vary depending on the type of water heater and the quality of installation and maintenance. Tankless water heaters can last up to 20 years, while storage tank water heaters typically last around 10 years.

5. What is the cost of a new water heater?

The cost of a new water heater varies depending on the type and size of the unit. Tankless water heaters are more expensive than storage tank water heaters but can save you money on energy costs in the long run. You can expect to pay anywhere from a few hundred dollars to several thousand dollars for a new water heater.

6. What is the installation process for a new water heater?

The installation process for a new water heater involves disconnecting the old unit, removing it, and installing the new unit. This can typically be done in a few hours by a licensed plumber. It’s important to follow local codes and regulations, as well as the manufacturer’s installation instructions.

7. How often should I have my water heater serviced?

You should have your water heater serviced annually by a licensed plumber. This can help prevent issues and prolong the lifespan of your unit. During a service, the plumber will inspect the unit, check the connections, and flush the tank to remove sediment and debris.

8. What are some signs that my water heater needs to be replaced?

Some signs that your water heater needs to be replaced include a lack of hot water, leaks or corrosion, strange noises, and age. If your water heater is over 10 years old and experiencing issues, it’s likely time for a replacement.

9. Can I install a water heater myself?

It’s not recommended to install a water heater yourself, as it can be dangerous and lead to improper installation. It’s best to hire a licensed plumber who is trained to install and service water heaters.

10. How can I maintain my water heater to prolong its lifespan?

You can maintain your water heater by having it serviced annually, flushing the tank to remove sediment and debris, checking the temperature and pressure relief valve, and insulating the pipes and tank to reduce heat loss. It’s also important to avoid placing flammable materials near the unit and keep the area around the water heater clean and free of clutter.

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