From my understanding, they carry over the phone models they cover for up to 3 years, which outlives the warranty you end up buying from SquareTrade anyways. So while there may be incidents where the device has to be replaced, during your warranty period, there will never be a situation where they don't have the device to replace it with...but even if they did face that situation, they'd give you the next relevant version of the device. Essentially, if you bought an iPhone 5 when it was released and covered it under the plan, if they ran out of iPhone 5's to replace it with, they'd give you a 5S as they would still be stocking those for replacement purposes.
This is what happened with the plasma TV we had replaced by ST...the TV had a 4 year warranty, and 3 years into it it completely died. They did not have the TV anymore to replace it, nor could they find it...so they gave us the next years model variant (which actually came with more features). It was a remanufactured version, but we still have it today and it works perfectly.
Another pretty awesome feature of ST's coverage on mobile devices as far as I know though is that they cover battery replacement regardless of condition of the device...so if you're a person who keeps these things for years (like most people do with iPads I imagine), you can get a brand new battery in there years later when the original one starts pooping out.
One thing to keep in mind though when buying a ST warranty is that during the first year of ownership, ST will refer you to Apple for ANY warranty work outside of negligent repairs (broken screens, damage, etc). If the device starts acting up, and you want service, they won't touch it for the first year, even though when you buy the warranty, the coverage starts when you buy it, which would include the first year...kind of weird, but it is what it is.