Tankless water heater is a class of water heater which comes without any tank to store water. They provide hot water only as it is needed hence also known as demand-type or instantaneous heaters. They are high-power heaters which instantly heats water as it flows through the device, and do not retain any. They provide a plentiful continuous flow of hot water. Since the tankless units have no storage tank and thereby have no standby heat loss.Irrespective whether a tankless heater is point-of-use or a whole-house unit, they work the same basic way. Cold water enters the unit and is heated by a heating element (heat exchanger) which is turned on by a flow activated switch. The heat exchanger can be electric resistance heating coils or a gas fired burner using natural gas or propane. (Gas units generally have more heating capacity and larger whole-house units are typically gas fired.)Tankless heaters can be classified based on:• Installation pointo Point-of-use: This type of tankless heaters are used at specific location to cater local needs e.g. kitchen, bathrooms etc. Relatively smaller in size and serves single location needs.o Whole house: This type of heater caters need of the whole house. Installed externally they provide at every required place in the house.• Energy sourceo Electricity based tankless heaters: They use electricity as their power source to provide hot water.o Natural gas or propane based models: They use gas as their power source to provide hot water.On the contrary to Conventional system which stores constantly heated water a Tankless heater heats cold water with a gas burner or electric element as it passes through the heater.The initial cost of a tankless heater is greater than that of a conventional storage water heater, but the former will typically last longer and have lower operating and energy costs, which could offset its higher purchase price. Tankless heater costs you around 1400$ initially.Most tankless heaters have a life expectancy of more than 20 years. The average annual operating cost for a tankless system is between $165 to $170, nearly half the cost for a conventional storage (costs around $230 to $285 annually to operate).Apart from running cost Tankless water heater are 24%-34% more efficient than conventional storage tank water heaters. There are no standby heat losses with Tankless heaters which is a common property of conventional storage heaters.Proper installation depends on many factors. These factors include fuel type, climate, local building code requirements, and safety issues, especially concerning the combustion of gas-fired heaters. Therefore, it’s best to have a qualified plumbing and heating contractor install your demand heater. Periodic water heater maintenance can significantly extend your water heater’s life and minimize loss of efficiency. Read your owner’s manual for specific maintenance recommendations.Keeping in mind the energy efficiency and cost of running and operational life Tankless water heater are way to go as they are friendly to your pocket and environment.