Hallucinations are common in dementia, and potentially have very many causes. When I hear about hallucinations, the first thing that I want to know is the stage of dementia in which it is occurring. If I hear that hallucinations are occurring in someone with Alzheimer's disease Alzheimer's disease
A neurological disease that affects memory and behaviour. It is characterized by beta-amyloid plaques and neurofibrillary tangles in the brain. There is no known cause but genetics and lifestyle are thought to play a role., I expect that they should be in the severe or perhaps in the moderate stage. If it is happening in someone with mild dementia, I consider that they have Dementia with Lewy Bodies Lewy bodies
Round clumps of protein found in the brain's neurons in many people who experience a neurodegenerative disorder. until proven otherwise. The reason to take that approach is that it makes me try and avoid drugs known as neuroleptics. These drugs often work well in someone with hallucinations. However, a person who has Dementia with Lewy Bodies Dementia with Lewy Bodies
See Lewy body disease. can get very severe side effects, known as the neuroleptic sensitivity syndrome, if they are given neuroleptics. Another thing to consider is delirium, which is a sudden change in their cognitive Cognitive
See cognition status; when hallucinations are present, delirium often results in the person being very agitated.

Not all hallucinations are due to dementia or delirium. They can be seen in depression Depression
A disorder where a person experiences a constant state of sadness and low mood which interferes with their daily activity., and also in a condition known as the Charles Bonnet Syndrome. In that syndrome, hallucinations occur in a person who has poor vision. What happens is that the brain tries to make sense of the limited visual information that it gets by building unreal images (often of very small people). Usually, people who have the Charles Bonnet Syndrome have good insight into the unreality of their  hallucinations.