Homeowners rarely think about their water heaters until something goes wrong. Yet these appliances play a critical role the backdrop of our daily lives.
The average household uses 64 gallons of water each day, much of which passes through the water heater to supply hot water for showers, laundry, dishwashing and more. Water heating accounts for as much as 18 percent of our utility bills, costing an average of $400 to $600 a year.
Selecting the right water heater for your home is a big decision that affects not only your budget but your environmental footprint—and your ability to meet your family’s hot water needs. There are two main types of hot water heaters to choose from: conventional and tankless. Both have their benefits and downsides, so it’s important for homeowners to understand what each type has to offer.
 
What’s the Difference?
Conventional water heaters store water in large tanks, which are kept heated throughout the day to provide hot water whenever it’s needed. Most hold 50 gallons of water at a time. As the water is used, the tank refills and is reheated.
But most people don’t use hot water all day; rather, they tend to use it at peak times. Much of the energy used to keep the tank heated around the clock is wasted. To solve this problem, tankless water heaters were developed.
A tankless water heater “produces hot water only when people need it,” says the Chicago Tribune. “That matches the way most households use water—not 24 hours a day, but in peak periods for showers in the morning, and for cooking and doing dishes in the evening.”
Many homeowners are opting for tankless models to make their homes more sustainable. Since they only heat water when it’s needed, they’re up to 34 percent more energy efficient than traditional tank heaters. But are they really better?
Weighing the Pros and Cons
Cost: Comparing the cost between tankless and conventional water heaters is tricky. Initially, tank heaters cost up to a third less than their tankless counterparts, which can run upwards of $3,000. While tankless heaters cost more upfront, they can save homeowners an average of $116 a year in energy bills—but it can take up to 25 years to break even on the investment.
Functionality: Conventional heaters have a limited supply of hot water at any given time (usually 50 gallons). This water heater can easily supply water to several fixtures simultaneously; however, at times of heavy use it’s possible to run out of hot water. Tankless heaters never run out, but they’re limited by their flow rate of two to five gallons per minute. Most aren’t able to keep up with demand from multiple appliances or fixtures at one time.
Repair and replacement: Although tankless water heaters have nearly twice the lifespan of conventional ones, lasting 20 or more years, both systems will break down eventually. When they do, traditional tank heaters are cheaper to replace and easier to install. Tankless heaters, on the other hand, come with longer warranties (15 years, compared to 6 for a conventional heater) and have easily replaceable parts that can extend their life by several years. As an added bonus, they don’t cause flooding when they break down, says water heater specialist Larry Murdock.
Protecting Your Water Heater
Whether you install a tankless or conventional water heater, an unexpected repair or replacement can disrupt on your budget. A water heater repair can cost up to $200, while replacement can run anywhere from $700 to several thousand dollars.
A systems and appliance warranty protects you in case your water heater (and many other major systems in your home) breaks down. Systems and appliance home warranties for homeowners typically cover:

• Kitchen appliances
• Washer and dryer
• Water heater
• Plumbing
• Heating and air conditioning
• Electrical system
• Interior gas lines

Most homeowners don’t have room in their budget for a sudden home repair. A systems and appliance home warranty serves as a safeguard against emergencies, regardless of which type of water heater you choose.