Abstract: An annular resilient compressible flexible-urethane dam (10) is placed around the inner storage tank (14) of a water heater. The dam has a free-state inner diameter (24) slightly less than the outer diameter of the tank, and a free-state outer diameter (26) slightly greater than the inner diameter of the outer jacket (18). The outer jacket (18) is moved downwardly over the tank (14) to engage the dam (10) along the inner surface (20) of the jacket (18). The dam (10) is round (28) in lateral cross-section and rolls (FIG. 4) an equal distance along each of the outer surface (12) of the tank (14) and the inner surface (20) of the jacket (18) as the jacket is moved downwardly to its final position (FIG. 5). Foamed insulation (40) is then introduced as a liquid into the annular space (22) between the tank (14) and the jacket (18) and hardens to form an annular insulation layer around the tank (14). The dam (10) prevents leakage of the liquid therepast.