i think 'psychological horror' has to touch on less literal or obvious or physical threats to focus on the existential implications of whatever horror phenomena. even if there is a literal physical threat like in silent hill, the themes focus on things like the fallibility of perception and epistemological uncertainty about what is going on. you don't just fight monsters in a silent hill game, you fight the environment, you fight your own character's perception of reality, mostly safe abandoned rooms transform into rusty bloodsoaked horror dungeons, the people around you are often untrustworthy and just as dangerous as the monsters, no one knows why any of this happened in the first place and there really isn't a coherent scientific explanation.

compare the above example of silent hill to something like Resident Evil or the film Dawn of the Dead. Both resident evil and dawn of the dead do use their settings and lore to address more fundamental issues, but this is only via metaphor, and usually points to something less existential and more sociological or political. RE and DotD both have more or less scientifically plausible 'zombies', that the characters more or less understand as a mundane physical threat like a natural disaster or a terrorist attack. the existence of the horror elements may cause them to question society (consumerism in DotD, rampant military-industrial complex corruption/dysregulation/corporate terrorism in RE) but not reality or their own minds. its more of a sci-fi intrigue or a post-apocalypse scenario than a mind bending psychedelic terror experience.