Do Tankless Water Heaters Save Money?

Do Tankless Water Heaters Save Money?

Hot water is a fundamental part of our modern life. Without it, we could not cook food, take showers, or wash our dishes. Unfortunately, however, standard water heaters have not changed much in the past few decades.

Fortunately, tankless on-demand water heaters are more available presently, so homeowners are making the switch. Now, you never have to worry about running out of hot water. But, we wondered, is it worth it to go tankless?

Let's find out.

Tankless Water Heater ROI
According to the Department of Energy, you can get up to 50 percent energy savings by switching to a tankless water heater. However, that is true only if you install a unit at each hot water outlet. Otherwise, you can expect to save around 14 percent for a whole-home tankless water heater. The variables to consider are:

  • Cost to heat one gallon of water
  • Your daily water usage
  • The cost of keeping water hot in the tank

If you base your calculations on average energy costs, using a traditional water heater will cost about $735 per year. This cost obviously does not factor in the unit price and installation expenses.

By comparison, using tankless water heaters dedicated to each room with running hot water costs around $360 per year. So, you can expect to save just over half on your utility bill. If you install a whole-house tankless water heater, you will pay around $624 per year for electricity.

Costs for a Tankless Water Heater
Tankless water heaters use two types of power to work: natural gas and electricity. We will compare the costs and fees associated with both options, starting with the unit price.

Gas Tankless Water Heater Unit Cost
The price of gas tankless water heaters ranges from around $750 to over $2,000. You need to consider how much water you use, as that will determine the best size for your home.

Electric Tankless Water Heater Unit Cost
Electric tankless water heater models are a bit cheaper than gas units, with small versions costing around $250. You can get high-end models for over $1,200.

Tankless Water Heaters and Installation Costs
You can pay between $1,000 and $1,500 for the installation of a tankless water heater. The factors to consider include:

  • Heater Type. Gas-fired heaters cost about $470 more to install.
     
  • Region. The western U.S. is more expensive.
     
  • Brand Quality. Some tankless brands are better than others, so you will pay extra.
     
  • New System or Upgrade. Older electrical panels cannot handle the load from a tankless heater. If you are upgrading a traditional storage tank, you may also have to install a new electrical panel.

Gas Tankless Water Heaters and Installation Costs
You can expect to pay between $2,000 and $2,900 for gas tankless water heater installation based on the various factors. The reason for a gas tankless unit's high cost is that you need heat venting.

Electric Tankless Water Heaters and Installation Costs
On average, the cost to install an electric tankless water heater ranges between $1,800 and $2,300.

Tankless Water Heater Maintenance Cost
Although tankless heaters require less maintenance than traditional models, they still need upkeep. You should inspect and clean your gas heater once per year. For electric heaters, you can go a couple of years before performing maintenance.

Gas Tankless Water Heater Maintenance Cost
On average, you can pay between $45 to $130 for a service inspection and cleaning. The main problem with these heaters is "hard" water. If your water has too many minerals, they can build up in the pipes and clog them.

Electric Tankless Water Heater Maintenance Cost
The cost of inspection and cleaning is still between $45 and $130. However, you do not need to do this every year, so you will save money in the long term.

How Much Energy Does a Tankless Water Heater Use?

How Much Propane Does a Tankless Water Heater Use?
You do not need much propane or natural gas to heat water to its boiling point. On average, a household could burn through 1.5 gallons per day, depending on usage.

How Much Electricity Does a Tankless Water Heater Use?
The answer depends on the size of your water heater. For example, a 13-kilowatt model uses more energy than a 24kW unit. As a rule, electric tankless water heaters need 120 amps to work. Since most homes have a max of 200 amps, you might need to upgrade your electrical system.

Tankless Water Heater Wattage
When looking at your water heater's specifications, it should tell you how many heating elements it has. Then, you can divide the total wattage by the number of elements. For example, if you have a 24kW model with three heating elements, each one produces eight kilowatts.

That said, you do not have to use all three elements at once. Instead, they work one by one. So, you only need to draw eight kilowatts at a time while the heater is working.

Are Tankless Water Heaters More Efficient?
Yes. As a rule, tankless water heaters are more efficient than standard water heaters. However, the cost difference shrinks the more water you use. Also, since tankless water heaters must heat the water continuously, they draw more electricity while working. So, if you take longer showers or run the sink more often, you will use more energy.

Tankless heaters are often more efficient is because they do not need standby power. This power is necessary for traditional water heaters because they need to keep the tank hot 24/7.

That said, you must pay close attention to the flow rate. This rate is the amount of water that can go through the system at once. The higher the rate, the more energy you need to get hot water.

You can also increase efficiency by switching to an Energy Star model. These models use less electricity, whether the heater is gas-fired or electric.

Are Electric Tankless Water Heaters More Efficient?
Yes, they are more efficient when compared to tankless gas heaters. Almost all the energy (98 percent) goes to heating the water. Gas models have about 80-85 percent efficiency. Although, condensing gas tankless water heaters offer 90% energy efficiency, compared to 80% for non-condensing gas-powered tankless units.

Yearly Cost of Gas vs. Electric Tankless Water Heaters
According to Consumer Reports, you can expect to pay around $200 per year for a tankless gas heater. Electric models are more expensive, costing about $535.

Are Tankless Water Heaters Worth It?
If you are looking at a tankless heater as a long-term investment, it can be worth the cost. However, since replacing a standard heater with a tankless model is expensive, you may not make any money back.

On average, a gas tankless water heater could take between 22 and 27 years to pay for itself. An electric model can take between 12 and 20 years.

Also, keep in mind you have endless hot water. Can you put a price on that benefit?

Does Homeowners Insurance Cover Tankless Water Heaters?
Yes, it does if the damage occurs from a covered peril. However, equipment breakdown and wear and tear are not covered by home insurance. Also, if your unit passed its life expectancy of 10 years, your insurer will likely not cover it.

Broken Tankless Water Heaters
What matters is the cause of the breakage. For example, if your water heater gets busted from wear and tear, you cannot file a claim. However, if it breaks from a covered peril (i.e., falling objects or fire), you can.

Perils Covered by Home Insurance; Perils NOT Covered by Homeowners Insurance

Damage Caused by Tankless Water Heaters
As a rule, home insurance covers "sudden and accidental" damages. If a pipe bursts on your water heater, you might be able to file a claim.

If the eruption occurred because of rust or worn elements, you must pay out of pocket.

If it bursts because of a power surge or freezing weather, you can claim the damage. Refer to the perils image above.

Recommended Tankless Water Heater Endorsements
Home insurance does not include equipment breakdown. So, if the tankless heater stops working, you must pay for it yourself. Some insurance providers allow you to add equipment breakdown to your policy. Be sure to talk to your agent about what is covered and what is not.

Get an Insurance Quote
Do not wait for a disaster to figure out whether your insurance will cover it. Instead, get an insurance quote for your home, including a tankless water heater. Click below to get started.

Hope that helps!

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At your service,
Young Alfred