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The average cost to replace a water heater is around $1,325, with a typical range of $900 to $1,800 for a standard replacement. The final price depends on the type of heater (tank vs. tankless), its size, fuel source (gas or electric), and the complexity of the installation. A simple one-to-one replacement will be on the lower end of the cost spectrum. However, if you are switching from one type of heater or energy source to another, you can expect labor costs to be significantly higher due to the extra work involved. It's also worth considering that while gas and electric heaters may have similar upfront costs, their long-term operating costs can differ based on local utility prices.

If your system is not vented properly, you could experience what’s called backdrafting. Backdrafting is when your ventilation system isn’t working as it should, and instead of releasing gases outside, they get trapped inside your home. 

Gas and propane water heaters create a few types of combustion gases, but the most dangerous is carbon monoxide. If there’s too much build-up of these gases inside your home, it can lead to carbon monoxide poisoning.

Every city and state will have its own set of installation codes and laws. Some won’t require you to obtain a permit before replacing your water heater, though we recommend you do, regardless of the local codes. On the other hand, some cities and states might require secondary permits for plumbing and electrical work related to the installation. Check with a local water heater installation company and local building codes to confirm which permits are required and what the specific laws are.

Homeowners insurance may cover the repair or replacement of a water heater if it's damaged by a covered peril, such as a fire or a burst pipe. However, policies typically do not cover repairs or replacement needed due to normal wear and tear, old age, or lack of maintenance. For these issues, a home warranty or a manufacturer's warranty may provide coverage. While the policy might not pay to fix or replace the malfunctioning appliance itself, it often covers the cost of water damage restoration caused by the faulty water heater. Always check with your insurance provider to understand the specifics of your policy.