I would not externally insulate any type of water heater with a flammable insulation, or an insulation with a flammable face.
Leonidas wisely points out the warning about gas water heaters. The issue about the top of gas water heaters isn't only about obstructing the flue, but also about defeating the purpose of the draft diverter on a atmospheric-burner type of water heater. An atmospheric burner uses the concept of heated gases rising, as opposed to an induced-draft powered burner.
Water heaters manufactured in the last 10 years or so have a lot of insulation, unless you are buying the el cheapo units. Putting insulation in series with insulation reaches the point of diminishing returns very quickly.
If your water heater is in a closet, where it helps to self-heat its environment, then the small air space and walls become part of the effective R-value.
But if your water heater is set at 145 F, and is in a basement at 45 F, then the temperature differential is high, and additional insulation, if done safely and at reasonable expense, will probably help.
But if your water heater is set to 120 F, and is in a 70 F environment, then I think the placebo effect comes into play if you externally insulated it.