Insight is definitely common.

As a person develops psychosis, insight becomes impaired and is eventually lost. Eventually, confusion sets in, but once full psychotic insight is reached the hallucinations and delusions make perfect sense.

When, I was ill, my hallucinations were of real objects, I was actually seeing. They were visual distortions, that followed the theme of my delusions. None were images created by my mind, such as bugs crawling on the wall or objects seen in the corner of my eye.

Hallucinations are quite common, even in people who are not mentally ill.

If you can tell the difference and rarely experience them, there is no need to diagnose a psychotic disorder and take anti-psychotic medication.

Although, I have recovered from the psychosis, I still get "perceptual slippages". I can tell they are hallucinations because they are so bizarre and illogical.