Hallucination is a distortion (McKenna might say liberation) of perception. If I hallucinate being covered in spiders, I don't necessarily go around saying, "I'm covered in spiders, if you cant see them you're blind" (disclaimer: some might, but that's not a prerequisite of an hallucination).
The cynic in me thinks that use of the word hallucination is marketing to obscure functional inadequacy and reinforce the illusion that LLMs are some how analogous to human intelligence.