Of course, you’re technically very right - what they see is not vagina.
But in the culture, the word often simply refers to female genitals as a whole.
That doesn’t mean anyone using that word is not aware of the words “labia” and “vulva”, they can even differentiate between labia majora and labia minora etc.
But for the sake of brevity and simplicity, people just say “vagina”, even if it’s not necessarily a technically correct term.
Of course, you’re technically very right - what they see is not vagina.
But in the culture, the word often simply refers to female genitals as a whole.
That doesn’t mean anyone using that word is not aware of the words “labia” and “vulva”, they can even differentiate between labia majora and labia minora etc.
But for the sake of brevity and simplicity, people just say “vagina”, even if it’s not necessarily a technically correct term.