Yes, if you have an older water heater.
Insulating water heaters can be done to reduce heat loss and save money on standby energy losses. Generally, insulating kits for water heaters cost around $20 and pay for themselves in reduced energy costs in less than a year.
Although, water heaters constructed since 2004 are typically constructed with adequate levels of insulation, and adding additional insulation may void the warranty of the heater.
To determine if your water heater could use more insulation, place your hand on the surface of the water heater to feel for warmth. If it is warm, it most likely could use insulation. In cold climates, if the water heater is located in an unheated area, insulating the heater is recommended. When insulating an electric water heater do not cover the thermostat cover(s), temperature/pressure relief valve, and/or the electrical junction box. Insulating gas water heaters should be done with extreme care to avoid covering the gas valve, combustion air opening, burner area, exhaust hood, and the temperature/pressure relief valve. If you are uncomfortable insulating a water heater is best left to a qualified contractor.
For more information on saving money on water heating check out the following pages:
