I put in a high efficiency furnace two years ago. That left my gas water heater alone on the chimney.(Upstate NY) The HVAC company and the gas utility assured me that it was safe to do because the chimney was small enough, tiled, and ran up through the center of the house; but I never felt good about it. I was just too cheap to actually install a metal liner as some people recommended.
Anyhow, it seems to me that if I insulated the exhaust on the water heater (it is about 5' from the heater to the chimney) it would stay hotter and get out of the chimney without condensing better.
Does this make any sense? If so, is there any draw back to insulating the exhaust? It wastes a little energy in the winter, but saves a little in the summer, so it is probably a plus.
Thanks.