The short answer is yes. However, it may be a little more complex than that. It could also be a delusion - this is a false belief. Your mom may have a false memory of having seen her grizzly bear - she may or may not have actually done so. Almost anything can trigger these false beliefs, the chain of things which lead to them (for example, a picture in a book, or on television, or an old memory triggered by seeing something else, or a failure of cognition such as seeing something else and mis-identifying it) can be complex and make no sense, except to the person with dementia.
It is often very hard to differentiate between hallucinations and delusions, and of course, you can have both.
If your mom is pointing to an empty space and saying she sees a grizzly bear, then the chances are, that's a hallucination.
Claims of having seen one, may be more likely to be a delusion.
I believe that in Alzheimer's, at least, delusions are more likely than hallucinations, but of course that doesn;t mean your mom isn't hallucinating.
The best approach would be - to take her claim seriously, but matter of factly. There's no point in trying to dissuade her or change her mind, for example saying "there are no grizzly bears here" won't work. Just assure your mom that she is safe from the bear (or whatever) and try to distract her with something else.
It might very well turn out to be a "benign" hallucination/delusion; so long as mom isn't frightened or distressed by thoughts that the bear is damaging thing, or might get in and attack her then little more than acceptance and assurance should be needed.