Umbrella coverage provides an additional layer of protection above and beyond the limits of the liability coverages under your auto and homeowners insurance. An Umbrella policy can be less expensive than merely raising the limits on each of the policies separately and sometimes can be issued in higher amounts than your auto or homeowners insurance company is willing to provide.
High coverage limits that an Umbrella policy provides can be very important if you have significant assets (home, business, etc.) to protect. The umbrella policy protects you and others covered against the financial burdens of a catastrophic claim, lawsuit or judgment by (1) providing expanded liability coverage over and above your primary liability protection and (2) by increasing the amount of coverage beyond that of your auto insurance and homeowners/renters insurance. You still need auto and homeowners insurance coverage and insurance companies require certain minimum levels of underlying coverage.