Karen I have seen a similar device for hot water heaters.
If your HWH is above your head in the attic it might not be a bad idea as an extra measure of home damage protection to ask your plumber about one of these ?
Our resident Lowes expert OG will know.
Now I'm sure it just shuts off the incoming water supply line to the hot water heater.
There are going to be X amount of gallons in the tank that would still drain out if the tank itself fails and is leaking.
Hopefully your HWH sits in some sort of catch pan that drains outside somehow ?
If the water detection sensor is in the "catch pan" it will shut off the incoming cold water supply and keep it from trying to continually fill up the leaking tank.
Best case scenario : The HWH tank fails & starts to leak > depending on the flow rate of the tank leak (
usually a small leak at 1st and not a 'dump of water'.) > drains the 20, 40, 60 gallons of water out of the tank into the pan > hopefully the pan and the
clog free drain line to the outside handle the flow rate of the tank leak and doesn't "over-top".
No more water going into the HWH due to the auto shutoff valve > pan properly drained away 20, 40, 60 gallons of water from the tank > to the outside > no call to Allstate.
Never heard of a HWH in an attic, but they plumb homes in the south quite differently.