Does wrapping or insulating a hot water heater during cold weather harm the heater or cause a fire hazard?

An insulation blanket can make some water heaters more energy efficient if the water heater is located outside of the livable space of the house (like a garage, basement, or attic). As long as the insulation is installed correctly, and not covering things it shouldn't it should not be hazardous. Most modern heaters are best made more efficient in other, less risky, ways.

I've wrapper 2 gas water heaters with good results. One at home in the basement and one on a commercial building where the room it was in was directly vented to the outside and not much hot water was used. Helped with gas bills and helped me not worry as much about pipes freezing. I insulated the pipes too.

Thanks for the info Brian