7 Types of Water Heaters and How to Choose

Selecting the right water heater for your home can be a daunting task. With so many types, brands, sizes, and fuel options available, how do you know which one is the best choice? This comprehensive guide examines the seven most common types of water heaters and provides tips on how to choose the optimal model for your needs and budget. Read on to make an informed decision when purchasing your next water heater.


Having hot water available at all times is one of the essential utilities we often take for granted in our homes. Our daily routines — from showering to washing dishes — depend on a reliable water heater. When your old unit stops working efficiently or needs replacement, you have to consider several factors, like fuel type, capacity, and energy efficiency. With basic knowledge about the different kinds of water heaters, you’ll be able to select the right one to meet your household’s hot water requirements while keeping energy bills affordable.

Overview of the 7 Main Types of Water Heaters

There are two broad categories of water heaters — tank and tankless. Within each category, there are several types that use gas, electricity, or alternative energy sources for heating water. We’ll explore the features, pros and cons of each:

Tank Water Heaters:

  • Gas Storage Tank Water Heater
  • Electric Storage Tank Water Heater
  • Oil-Fired Storage Tank Water Heater

Tankless Water Heaters:

  • Gas Tankless Water Heater
  • Electric Tankless Water Heater
  • Hybrid Tankless Water Heater
  • Solar Tankless Water Heater

Now let’s look at each type in more detail.

Tank Water Heaters

Gas Storage Tank Water Heater

This is the most popular and common conventional water heating option for homes. It consists of an insulated storage tank that heats and stores a set amount of water. A gas burner at the bottom heats the water, which stays hot until you turn on the hot water tap.

How it Works:

  • Natural gas or propane heats the water in the tank.
  • When the tap is turned on, hot water from the top of the tank gets discharged through the hot water outlet.
  • Fresh cold water enters the bottom of the tank and gets heated.


  • Low purchase and installation cost
  • Provides ample hot water for medium to large households
  • Fairly energy efficient with a low operating cost
  • Fast water heating and recovery


  • Risk of leakage as the tank ages
  • Requires regular maintenance
  • Large, bulky size takes up space
  • Energy losses from keeping water hot in the tank

Cost: $400 to $1200 installed; $200 to $500 for just the unit

Electric Storage Tank Water Heater

Electric storage tank units use electric resistance coils submerged in an insulated tank to heat water. They are a common choice in homes without access to natural gas lines.

How it Works:

  • Electric heating elements heat the water inside the storage tank.
  • Hot water rises to the top while cold water stays at the bottom.
  • When the hot water tap is opened, water gets discharged from the top.


  • Compact size with easy installation
  • No combustion or risks associated with gas
  • Lower purchase cost than gas models
  • Provides ample hot water for households with 2-3 people


  • High operating costs from heavy electricity use
  • Slow recovery of hot water
  • Not ideal for large families
  • Risk of leakage as the tank ages

Cost: $350 to $1000 installed; $200 to $400 for just the unit

Oil-Fired Storage Tank Water Heater

Oil-fired water heaters are common options in areas without access to natural gas. Heating oil is stored in an external tank and pumped through coils in the water heater to generate hot water.

How it Works:

  • External oil burner heats water in the coils surrounding the tank.
  • The heated water gets stored in the insulated tank.
  • Hot water rises to the top while cold sinks to the bottom.


  • Provides plenty of hot water for medium to large households
  • Fairly energy-efficient
  • Long-lasting steel tank with lower corrosion
  • Ideal if you already use oil for heating


  • Higher energy costs than gas heaters
  • More expensive to install and maintain
  • External tank takes up space

Cost: $1200 to $2000 installed; $700 to $1500 for just the unit

Tankless Water Heaters

Unlike conventional models, tankless water heaters don’t store hot water. They instantly heat water on demand with high-powered burners. They are compact and can provide endless hot water when properly sized.

Gas Tankless Water Heater

As the name implies, gas tankless water heaters instantly heat water using natural gas or propane burners when you turn on the hot water tap. They are also known as on-demand or instantaneous water heaters.

How it Works:

  • Cold water travels through a pipe into the unit.
  • Sensors signal the gas burners to fire up when the tap is opened.
  • Gas burners heat the water rapidly as it moves through a series of copper heat exchanger coils.
  • Hot water gets supplied from the unit as long as the tap stays on.


  • Compact, wall mounted design
  • Provides unlimited hot water
  • Energy efficient since no standby energy losses
  • Long lifespan of up to 20 years
  • Lower operating costs for households with 2-3 people


  • Higher upfront costs
  • May not be suitable for larger homes
  • Requires sufficient gas line capacity and ventilation
  • Cold water sandwich effect while waiting for hot water

Cost: $1000 to $3000 installed; $700 to $1500 for just the unit

Electric Tankless Water Heater

Much like gas tankless heaters, electric models instantly heat water on demand using high-powered heating elements instead of burners. They are easy to install and distribute hot water efficiently. However, they may not be cost effective for large families.

How it Works:

  • Sensors detect water flow when the hot water tap is opened.
  • Electric current starts heating the water through heating elements.
  • Hot water gets delivered continuously and endlessly as long as required.


  • On-demand unlimited hot water
  • Compact, space saving wall-mount design
  • Easy plug and play installation
  • Lower operational costs for 1-2 person households


  • High upfront costs
  • Not suitable for bigger families and homes
  • Requires high amperage electric service
  • Possible scale buildup in heating elements

Cost: $500 to $1500 installed; $250 to $800 for just the unit

Hybrid Tankless Water Heater

Hybrid tankless water heaters combine the benefits of tank and tankless units in one system. A small storage tank provides a buffer of hot water while the tankless coils instantly heat more as needed.

How it Works:

  • Small built-in tank holds and heats about 2-3 gallons of hot water
  • When tap is turned on, stored hot water gets discharged immediately
  • Simultaneously, cold water passes through coils that heat water on demand
  • This provides a steady stream of continuous hot water to the tap


  • Endless on-demand hot water
  • Faster delivery than tankless units
  • High efficiency and low operation costs
  • Compact size for easy installation


  • More expensive than traditional water heaters
  • Venting and electrical service required
  • Not ideal for large households

Cost: $1500 to $2000 installed; $1000 to $1500 for just the unit

Solar Tankless Water Heater

Solar tankless systems use power from the sun to heat water instead of electricity or gas. This makes them an eco-friendly, renewable option to cut energy costs.

How it Works:

  • Roof-mounted solar thermal collectors harness the sun’s energy
  • Cold water passes through the collectors to get pre-heated
  • A gas or electric burner provides additional heating to achieve the target temperature
  • Hot water gets delivered on demand whenever required


  • Uses free renewable solar energy
  • Reduces water heating costs
  • Endless hot water supply
  • Green and environmentally sustainable


  • High initial investment
  • Roof space required for solar collectors
  • Requires plumbing and electrical modifications
  • Supplemental heat source required in cloudy weather

Cost: $5000 to $8000 installed; $3000 to $6000 for just the equipment and solar thermal collectors

Key Factors When Choosing a Water Heater

With so many types of water heaters to choose from, selecting the right one can seem like a daunting task. Use this buying checklist to determine the ideal water heater based on your requirements:

Fuel Type

The fuel source used by the water heater significantly impacts its performance and operating cost:

  • Gas – Best for larger households with the lowest operating costs
  • Electric – Easiest to install but higher running costs
  • Oil – For homes with existing oil heating systems
  • Solar – Eco-friendly but involves high installation costs

Hot Water Demand

Estimate how much hot water your household uses daily. Tankless heaters can provide unlimited hot water but have higher flow rate requirements.

Household Size

Larger households need higher capacity units. Tankless models must be sized appropriately to meet the peak demand.

Installation Location

Consider clearance requirements, venting, and electrical or gas connections for the various fuel types.

Efficiency Rating

Choose an Energy Star certified model with higher efficiency ratings to save on energy costs.


Compare equipment cost, operating expenses, and installation charges when budgeting for a new water heater.

Tank vs Tankless

Tankless units provide endless hot water on demand while tank models store heated water.


Seek at least 6-10 years warranty on tank corrosion and parts like heating elements.

By evaluating these key aspects, you can zero in on the most suitable water heater for your home and family.

7 Most Frequently Asked Questions About Water Heaters

When purchasing a new water heater, you probably have many questions about selecting the right product. Here are answers to some of the most common queries:

How long do water heaters last?

On average, tank water heaters last 8-12 years while tankless units last 15-20 years. Proper maintenance can maximize the lifespan.

How do I choose the right tank size?

Multiply the number of people in your household by 20-30 gallons to find the appropriate storage tank capacity.

What is the most energy efficient water heater?

Gas tankless and solar water heaters have the highest energy efficiency. Heat pump electric water heaters are also very efficient.

How much does it cost to install a tankless water heater?

Installing a gas tankless unit costs $1000 to $3000 while an electric model ranges from $500 to $1500 installed.

Do tankless water heaters run out of hot water?

No, tankless heaters provide an endless, continuous supply of hot water when properly sized for your household.

How long does a tankless water heater last?

Tankless systems have a lifespan of 15-20 years, nearly double that of tank water heaters.

Should I choose gas or electric tankless?

Gas tankless heaters are ideal for larger homes. Electric models work well for smaller households of 1-2 people.


With this comprehensive guide, you should now have a firm grasp on the different types of water heaters available and the key factors involved in selecting the right one. Carefully consider your family’s hot water requirements, fuel availability, efficiency needs and budget. And remember – the best investment is an energy efficient unit sized appropriately for your household that provides reliable hot water for many years to come. Taking the time to make an informed decision will lead to long-term savings on your utility bills while meeting your daily hot water needs.