Title insurance is not mandatory. However, as a practical matter, title insurance and escrow (closing) services are a part of most real estate transactions. Most lenders who refinance loans, or provide the primary financing for real estate purchases will secure the loan with a mortgage (deed of trust) that is insured 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.