Which statement is true regarding dividends in a permanent policy?

Dividends in a permanent life insurance policy are a return of excess premiums paid and are not guaranteed. However, one of the primary ways policyholders can use these dividends is to reduce their premium payments. This provides flexibility to the policyholder, allowing them to manage their cash flow more effectively.

Using dividends to offset premium costs means that policyholders can maintain their life insurance coverage while potentially alleviating some financial burden. This use of dividends is advantageous as it enables the policyholder to continue enjoying the benefits of the policy without immediate full premium payment, especially during times when finances may be tighter.

While dividends can be utilized in several ways — such as accumulating interest, purchasing paid-up additional insurance, or being taken as cash — reducing premiums is a common and functional use that directly impacts the policyholder's ongoing obligations.

In contrast, dividends are not guaranteed for all policies; they can indeed influence the death benefit but do not automatically increase it. Lastly, while dividends may not directly impact non-forfeiture values, any decisions regarding dividends can have subsequent effects on the overall policy status and benefits, including those non-forfeiture options.