Water heaters fail at an average age of 10-15 years. Replacement costs $600-$2,500 for standard tanks, $1,000-$4,000 for tankless. Most home warranties include water heater coverage — but the details matter.
Most plans cover:
Coverage varies. Many plans include tankless water heaters as a covered item, but some plans specifically exclude them or have separate sub-caps. If you have a tankless system, verify before purchasing.
Sediment buildup. This is a common gotcha. Water heater failure caused by sediment accumulation is excluded by most companies as a “maintenance failure” — you’re supposed to flush the tank annually. Some companies have removed this exclusion; check your specific contract.
Rust and corrosion. External rust damage or internal corrosion-caused failure is excluded by most companies. AHS covers rust and corrosion — a differentiator.
Energy upgrade requirements. When your old 40-gallon tank fails and local code now requires a 50-gallon unit, or when a new heat pump water heater is required, the warranty typically covers the base replacement. Code-required upgrades and associated electrical/venting modifications are often excluded.
Expansion tanks. Local code increasingly requires expansion tanks with new water heater installations. These may not be covered.
Pre-existing conditions. A leaking or underperforming water heater that existed before your coverage started may be denied.
Water heater caps typically run $500-$1,500. A standard 40-50 gallon tank replacement (unit + labor) runs $800-$1,500. The caps are generally adequate for standard replacements. Tankless replacement ($2,000-$4,000) can exceed typical caps.
AHS specifically covers sediment-related failure and rust/corrosion — broader than most.
AFC Home Club pays per reimbursement schedule — no explicit cap but schedule-based.
Old Republic covers water heaters with the same A.M. Best A+ financial backing.
File when the water heater stops producing hot water, is actively leaking from the tank (not just condensation), or shows mechanical failure signs. Don’t file for:
Tankless water heaters require annual descaling in hard water areas. Missing this maintenance can give a warranty company grounds to deny a failure claim. If you’re in a hard water area, document your annual flush.