I would say the correct answer is that the insane live in a reality of their own. The protagonist of the story wasn't always insane; however, over time, he grew mad because of his landlord's eye of a vulture. He began seeing things, thinking that the eye made him do crazy things, such as kill the old man. After that, this mad man kept hearing the dead man's heart beating, which is how he revealed his crime to the policemen who came to the house to investigate.
