“Huh? so now only some people are covered by Christ’s death, not everyone?”
Well, yes and no. No, in that Christ’s payment is sufficient to pay the debt owed by each and every man that ever lived. Yes, in that not all will receive Christ’s grace, and without that grace, you must be judged on your own works.
“Who decides who is covered and who isn’t?”
God.
“Were Mormons the correct answer?”
I think we can safely say “no” to that one.
“If you’re going to try to argue that Christ’s death is full and final payment for our sins, you can’t really argue that it only applies to some people.”
Sure I can.
“Christ came for everyone, not just the Mormons.”
Yes, but sadly, many reject him.
“And what about people that don’t believe, but still lived a ‘good’ life?”
Nobody lives a good life. All of us sin, and fall short, and require salvation.
“Just because they were born into the wrong religion or before Jesus was around? What about them?”
God is a loving God, fair and merciful. When Christ died, he went and preached to those who had already died, so they could have an opportunity to hear the Gospel. I trust that God will similarly give everyone such an opportunity, one way or another.