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October 6, 2026
Most homeowners don't think much about their water heater until something goes wrong. Yet it's one of the hardest-working appliances in the home, providing hot water for showers, dishes, and laundry.
Water heating usually ranks as the second-biggest energy cost in a home, just after heating and cooling. The type of water heater you choose can affect your energy use and utility bills for years to come. If your current water heater is nearing the end of its life or you're simply looking to better understand your options, a little knowledge can go a long way.
Read on to learn how different types of water heaters work, what to look for when comparing models, and how you can save on your water heating costs.
All water heaters are designed to provide hot water when you need it, but they don't all work the same way. The three most common types found in homes today are: '
Storage tanks
Tankless
Heat pumps
Here's a closer look at how each one works and the benefits they offer.
Storage water heaters are common in many homes. They come in both gas and electric models. They store heated water in a tank, so it is ready whenever you need it. Storage tank water heaters cost less to buy at first. However, they consume more energy to keep the water warm, even when it's not in use. Choosing a well-insulated tank can help reduce standby heat loss.
Typical lifespan: 10 to 15 years.
Tankless water heaters use gas or electricity to heat water on demand rather than storing it in a tank. This provides a continuous supply of hot water. However, using hot water in several places at once, such as showers, faucets, and your clothes washer, can stretch a unit to its limit.
Some electric tankless models require electrical upgrades. Before choosing a tankless water heater, check with an installer. They can verify if your home’s existing electric service can handle the system.
Hard water can lead to scale buildup on the heat exchanger. So, homeowners with hard water might want to install a water softener. Regular maintenance also helps reduce scale buildup.
Typical lifespan: 20 years or more.
Heat pump water heaters use electricity to transfer heat from the air to water. This makes them two to three times more efficient than regular electric storage water heaters. These water heaters have a higher initial cost, but they save money on energy in the long run. Efficiency Smart’s $300 rebate makes choosing a heat pump model even more affordable.
Heat pump water heaters need enough space and airflow to work efficiently. That's why where you install them matters. They also release cool, dehumidified air into the surrounding areas, which can be beneficial during warmer months. Heat pump water heaters need regular maintenance, just like any appliance. This includes cleaning or replacing filters based on the model. Before choosing a heat pump water heater, ask your installer whether a 120-volt or 240-volt option could meet your household's hot water needs, especially if you are seeking to avoid electrical upgrades.
Typical lifespan:10 to 15 years.
The best water heater for your home depends on more than its initial price. Consider the cost, size, and efficiency of a system before making your decision.
Look beyond the purchase price and consider installation and long-term operating costs. A more efficient model may cost more upfront but will cost less to operate over its lifetime. Your water heater should also be properly sized for your household's hot water needs. When you compare models, look at the Energy Guide label. It shows estimated energy use and operating costs. This can make it easier to compare similar models.
Since water heating is one of the largest energy expenses, small changes can lead to noticeable savings. Here are a few tips to save on water heating costs:
Install low-flow faucets and showerheads to reduce water usage.
Wash clothes in cold water whenever possible.
Fix leaking faucets and fixtures, as even small leaks add up over time.
Follow the manufacturer's recommendations for insulating your water heater tank and pipes.
Run your dishwasher and clothes washer with full loads whenever possible.
Look for ENERGY STAR-certified dishwashers, clothes washers, and water heaters when it is time for a replacement.
Efficiency Smart can answer your questions about water heaters and provide tips to help you save on your water heating costs. Contact our customer support team at 877-889-3777 or [email protected] for more information.
Visit our Resources page to explore tips and tools to improve your home's energy efficiency and save money.
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