If your water heater is older than 2004, consider wrapping your water heater with an insulating blanket designed for this application. Water heaters manufactured after 2004 don't need added insulation because the federal requirement for tank water heater insulation was increased that year. Most water heaters manufactured before this time are known to have less insulation which contributes to standby loss and wasted energy.
Since water heating can be 14% of an average house's annual energy use, installing an insulating blanket can pay off quickly. One blanket option can be found at www.radiantguard.com. Some manufacturers have specific guidelines for installing an insulating blanket so be sure to read the owners manual first, if you are able. Areas that should not be covered on gas units include: warning labels, the top of the unit, the pressure relief valve, the control or access panel, and any bottom air inlets.