I had an elderly relative who suffered those hallucinations, including the black dog, bugs in the bed, people in the room, etc. The first time she hallucinated the doctor said that it was likely the result of dehydration caused by a urinary tract infection (very common in the elderly) and the diuretics she took because of a heart condition. The blood and urine tests confirmed the diagnosis and the antibiotics and IV fluids fixed the problem. From then on, whenever she'd get the hallucinations, she was dehydrated and/or with a UTI and would be treated accordingly. On one occasion the dehydration was more severe than before and the doctors squeezed the saline solution into her vein very rapidly and abruptly ended the hallucinations in a couple of minutes. Other times, the nurses or the family would give her frequent glasses of water or juice to drink till she became rehydrated and the hallucinations would go away.

Here is a link to what may have happened to D's daughter: Symptoms of Diabetic Hallucinations and another link showing dehydration as a cause of hallucinations also in children: What Are the Causes of Hallucinations in Children?

Or she may have also had sleep-deprivation hallucinations (like the long-haul truckers who see the black dogs) or hypnagogic or hypnopompic hallucinations that occur when a person is falling asleep or waking up, respectively.

The point is for her to see a doctor so that she doesn't continue being scared by something that was just a common hallucination.