What does the reduction of premium option utilize to lower next year's premium?

The reduction of premium option primarily utilizes dividends to lower the next year's premium. This feature is commonly found in participating life insurance policies, where policyholders can receive dividends based on the company's performance. These dividends can be used in several ways, one of which is to reduce the upcoming premiums.

When a policyholder opts for this feature, the insurance company deducts the amount of the dividend from the total premium due for the following year. This can provide significant financial relief, as the policyholder pays less out of pocket for their insurance coverage while still maintaining their policy benefits.

In this context, the use of policy loans, cash value, or riders does not apply directly to the reduction of next year's premium in the same manner as dividends, as those options serve different purposes and functions within life insurance policies.