IS TITLE INSURANCE MANDATORY?
In a word - no. However, as a practical matter, title insurance and escrow (closing) services are a part of most real estate transactions. Most lenders who provide the primary financing for real estate purchases and refinances will secure the loan with a mortgage that is insured (as to priority) by a title company. Secondary financing (e.g., a line of credit) may be unsecured and/or uninsured.
As for an owner’s policy, a seller may insist on putting title insurance between him or herself and the buyer, or a buyer may insist on a policy to eliminate the need for a lawsuit directly against the seller (e.g., under deed warranties). The Colorado Real Estate Commission contract forms include a clause providing for a title insurance owner’s policy at the seller’s expense.
Though “whether or not” may be a non-issue, there is a “who” decision regarding title insurance. Insureds (buyers and lenders) and those who purchase policies (sellers and borrowers) are encouraged to shop their title providers. Though cost is a variable when comparing, it is not the only one. A smart consumer should consider the kind and quality of service in addition to the cost.