Whenever you are working on a hot water system whether it uses there are always safety issues to consider.
Make sure that in an water heater system that you not only shut off the hot water heater itself, but also shut off the breaker. There should be no sparks or open flames around the hot water heater even if it is turned off. In a water heater unit, the valve should be shut off both at the water heater and at the supply line. Avoid wearing loose clothing while you work.

When installing the re-circulating pump in your hot water system you do not have to consider insulating. The pump system works much better without insulation. The problem with this, though, is that if it is not insulated then the water heater will cycle between on and off more often.