Hello Philip. This is indeed a good question, one that many buyers and sellers probably have asked themselves. There two types of coverages. Buyer's and seller's coverage. Many times, sellers will offer to pay for a home warranty plan as a buyer's incentive and there are different plans available, the basic and more comprehensive plan and a flex plan (not all companies offer the latter version). The premium for the buyer's plan is paid at the close of escrow and it covers the home for 1 year thereafter. Most companies have recently expanded. The most common exception is that they don't cover anything that did not work on the day ownership changed, which means you can't buy a house with a heater that you know does not work and then submit a claim to the home warranty company and have the heater repaired or replaced after the close of escrow. However, if the heater was inspected while in escrow and the inspector did not call it out as not functioning, you have a pretty good chance that the insurance will not question a claim during the policy period. In my personal experience, getting a home warranty for the buyer is worth every penny.
The seller's coverage is a little bit different than the buyer's coverage as the kind of coverage you can purchase is more limited. The seller's coverage is purchased during the listing period, but you don't pay for it unless escrow closes. Thus, if the home never sells, you don't pay for the coverage even if the insurance paid out on a claim. Your agent should be able to put you in contact with the local AHS representative and you can ask all your questions about coverage and exceptions to coverage. You may also want to compare the coverage to that offered by other home warranty companies (First American, Old Republic, Fidelity National, to name just a few of the bigger companies). My last buyers chose First American because they also included pest coverage. I hope this helps you make an informed decision.