A water heater can be insulated by fitting it with an insulation blanket or by wrapping it with a hot water cylinder jacket. Fitting a tank with a cylinder jacket or insulation blanket reduces heat loss. Covering the hot water pipes with foam insulation further reduces heat loss.
For gas heaters, the top part of the heater, the controller, the air intake vent and the pressure or temperature relief valve should be left uncovered. For electrical water heaters, the heater access panels, any electric wire connected to the tank, and the temperature or pressure relief valve and over flow pipe should not be covered by the insulation.