What is umbrella insurance? It’s liability insurance. It pays for your legal expenses and losses if sued for a variety of incidents related to injuries to other people, some lawsuits, and damage to other people’s property. It doesn’t protect you from professional or work issues and it doesn’t protect your property or costs in an accident. Why do you need it? It’s strictly to help pay the costs of someone else’s misfortune, for which you are somehow financially responsible.