I can understand how you feel. It was probably very puzzling for you and probably for her as well. However, I agree with the previous response that it may not be anything really bad, especially if it has happened only once or a few times and there is no other change in her behavior during the day. Mental illness usually triggers around adolescence and it would be very unlikely that at 4 years old she would have such a diagnosis.
Something that you may want to check is whether she has seen a scary movie or even an ad for a movie. Remember that what may be deemed appropriate child TV to you may be scary for a 4 year old. Is it possible that she saw something on TV that worries her. Especially with a 16 year old in the house, you may not know what she has been watching.
When I was little, I used to see floating lights or "fairies" and I used to chase them all over. Once I fell out of bed trying to grab one! Later I learned that my eyes are very sensitive to light so that I always see an after image of things, such as you would see if you stare directly at a light bulb. Perhaps you may want to check to see if she actually "sees" these things because of some issue with her eyes.
It may be a form of sleep-walking. Try to steer her towards making "friends" with the bugs she sees and help her put the bugs to bed. This may help calm her down and put her to sleep rather than trying to insist that there are no bugs there. Be aware that while she seems alert and responsive, she may actually be somewhat asleep such as in sleep-walking and actually dreaming. In that case, just try to steer her out of danger and calm her down. If it continues, since you say that she already has "night terrors" you may want to have a sleep assessment done. If it turns out to be a sleep problem, I would completely avoid for her to watch TV before bed, and encourage her to take a nice bath, read a relaxing story and/or listen to soothing music before bed. Doing a little bit of yoga with her (or at least some easy stretches) can also help her sleep much better.
Hope that this is helpful.