Well, as with any insurance, they're betting against you. They're trying to get you to make a monthly payment forever that maybe you'll forget about. Costs range from $400 to over $1000 a year. What is actually covered varies considerably. You always have to pay a service fee. This article from the Washington Post lists the pitfalls and recommends just having a savings account for repairs. They also suggest you ask for the cash value of warranties offered by sellers, instead of the warranty. I do understand the appeal; however, of reducing the risk of putting out more cash that first year after you spent all that money to buy the house.
The most costly things in your house are the windows and the HVAC system. So, make sure these are in good order when you buy.