Legal Question in Wills and Trusts in North Carolina

You are not obligated to use the life insurance proceeds to pay off the mortgage but if you do not pay the mortgage then the lender will foreclose. You inherit the home subject to the mortgage and must continue to pay on it if you wish to keep the home.

Yes, you need to alert the mortgage company to your father's death. You may need tp probate an estate for your father. You having the title to the car is meaningless if the car is still in your father's name. You have to probate an estate or otherwise get a directive from the clerk before you can transfer the car into your own name.

There is a process for small estates valued at less than $10,000 in NC. You do not indicate what the car is worth or what other probate assets there are. Life insurance or checking accounts which are jointly owned or payable on death are all non-probate assets.

You are starting to go down the wrong road here by somehow thinking you are being clever by paying off the mortgage and not notifying the lender. I suggest that you do things properly and a public legal advice site, while a great place for general information, is not substitute for paying a probate attorney who practices in Cabarrus County to review the will and all the details and advise you. If you cannot afford to consult a probate attorney, then you need to schedule an appointment with the clerk of court. You need to file your father's will and go over the debts/assets to determine whether the probate assets justify full blown probate or whether you can use the affidavit of collection and disbursement.