An umbrella policy adds additional liability coverage above and beyond your other insurance policies, like auto or home insurance. Best of all, one umbrella policy extends coverage on multiple underlying policies. If, for example, you're responsible for an auto accident that causes $750,000 of bodily injury damage and your auto coverage limits are only $500,000, an umbrella could kick in to cover the additional $250,000. If you didn't have an umbrella in the previous example, you'd be responsible for paying the $250,000 out of pocket.