How do I pay for my dad's funeral service if the nursing home takes all of his money including his life insurance policy?

The nursing home told us today that my father's life insurance policy has to go to them, leaving my sister and I to pay for my dad's funeral arrangements. That doesn't sound right to me. How do we go about arranging for his funeral arrangements without having to pay for them out of our pocket. Shouldn't his life insurance policy be applied to it? This is all new to me and the nursing home contact doesn't seem to know what she's doing and I don't trust her. Can anyone provide me with some advice or guideance on this matter?