The U.S Department of Energy issued mandatory, new energy-efficiency standards for water heaters, which began April 16, 2015. The new water heater standards require a higher Energy Factor rating on most residential gas, electric, oil and tankless water heaters, depending on unit type and volume. The revised standards are expected to save American consumers billions of dollars in long-term energy savings. But the new standards may cost homeowners in the short-term, when outdated equipment needs replacing. To meet the requirements, most units will have more insulation, making them larger in size.

Prices for water heater replacements range from $952 to $2,098 nationwide*.

Your home warranty will help protect your budget from these covered costs. However, if additional upgrades are required to repair the unit or create space for it and bring the installation up to code, these items may not be covered as part of your contract. These items may include the following:

Common Water Heater Code and Modifications

Typical Codes and Modifications
What You Should Know
PermitsPermits may not be required in all areas. When required, it depends on the local city or county requirements on how they are managed. Depending on the area, permits may be pulled online, require someone to go to the city and wait in line to pull the permit and some may require the contractor to meet the inspector at the jobsite for signoff.
Disposal (Ground Floor/Garage)Includes handling and transporting to drop-off site and disposal fees that may apply
Disposal (Basement/Attic)Generally, requires 2 people to assist in lifting and handling for safety and to help prevent damage
Gas Line ModificationsManufacturer and Code will generally specify required piping size and material, new units being different size can require re-piping or adding additional piping for installation. Code may also determine if flex lines can be used or not and may be part of the modifications. Some manufacturers and codes may not allow the reuse of the existing gas connectors, fittings or valves when a unit is replaced due to safety concerns. A flexible gas line can withstand movement and is usually required in seismic areas.
Drip LegAlso known as a sediment trap, generally required by code, is a capped off section of gas line which is installed in such a way that any debris or moisture in the gas line will fall into the trap where it can be cleaned out easily. The required length of the drip leg varies.
Gas StopGenerally required by code a gas stop, or shut off, is required for safety so the gas can be shut off quickly if needed. Some manufacturers and codes may not allow the reuse of the existing gas stop when a unit is replaced. IPC 504.3
Vent Pipe/FlueA vent or flue may require modification to make a new unit fit due to size, or in some cases require the whole flue pipe through the roof to be replaced to meet current codes requiring dual wall vs the original single wall.
Water Line ModificationsRe-piping or changes to the water lines may be required due to code requirements on material used, but generally due because of the new size of the units. Dialectic unions may also need to be added per code or manufacturer requirements.
Water flex lineCode will generally dictate if water flex lines or hard pipe is required. These flexible lines withstand movement and are required in earthquake zones. If flex lines are used generally they will include dialectic unions. Some flex lines may not be able to be re-used per the manufacturer or code.
Di-electric UnionsWhen two different metals are connected in the presence of an electrolyte (in this case tap water) you get a reaction called galvanic corrosion. To avoid this, plumbers use a special coupling called a dielectric union. Manufacturers generally require this and it may also be code in your area.
Ball ValveAll codes require a shut off valve on the cold water line. IPC 503.1
T & P ValveThe T&P valve releases pressure, and a “blow tube” directs the scalding hot water toward the floor. The required distance between the blow tube and floor is usually 18 in. or less. IPC 504.4
T & P Line ModificationIn some areas code requires running the t&p line outside the foundation to certain specifications. This can include drilling through walls, ceilings etc and running line through walls, attics, soffits to get the line outside in a visually pleasing spot and still to code and sealing up the exit location of the home. IPC 504.6
Expansion TankMost manufacturers require an expansion tank in a closed loop system and in some areas, it is also code. An expansion tank prevents pressure increases due to thermal expansion of your water. As your water is heated from 50° F to 120° F, it expands by approximately 2%.
Earthquake StrapsIn areas that have seismic activity code generally requires the application of earthquake straps to secure the unit to a wall for safety reasons. In some cases, you cannot reuse the existing straps due to the size of the new unit. IRC P2801.8
StandDepending on location code may require the unit to be elevated or on a stand for safety reasons. IPC 502.1
Flood StopOptional device that can alert you and shut down the water supply to help prevent flooding of a leaking water heater
PanMost plumbing codes require a pan and drain pipe in locations where a leak can cause damage. But installing a drain pan is a good idea for any location. IPC 504.7.2
Drain LineCodes may vary by area but in some cases a separate drain line for the pan must be installed including running the line outside the foundation to certain specifications. This can include drilling through walls, ceilings etc and running line through walls, attics, soffits to get the line outside in a visually pleasing spot and still to code and sealing up the exit location of the home. IPC 504.7
Mixing ValveOptional device that can help your water heater supply up to 50% more hot water and create a built in anti-scald valve to your home and extend the life of your water heater
Electrical Modifications/DisconnectIn some areas, building codes require a bonding wire be installed between the cold/hot pipes and the gas line or to a grounding source. Also, code generally requires a means for disconnecting an electric water heater from its energy source which is generally a disconnect box. IPC 504.3

*Averages taken from: https://www.homedepot.com/c/cost_install_water_heater