I just use an automotive LED bulb, one that has the contacts on the ends of a glass tube. The one I use has 2 diameters of the contacts, one that works perfectly for N scale and the other for HO scale.
I can tell if there is voltage between the rails by bridging the rails with the bulb. And, I can tell if there is opposite phase/polarity across a rail gap by touching the contacts to opposite sides of the gap for the same rail.
If I was going to build something like this, I would probably make it more complicated to be more useful. For instance, I would separate the pickups from the 2 wheels on each side so that there are 4 independent pickups, and then put LED's across the leading pair to see track voltage and from the front wheels to the ones behind on each side to see if there is any our-of-phase situation across gaps.
Something like that might help me more quickly see issues in turnouts, where light bulb contacts aren't where you really need them. And, it still doesn't tell me which rail is dead, or if they are both dead.
So, I usually go for a multimeter when I really need to diagnose a problem, and would probably not build something like this at all.