Final answer:
Dylan is using the premium reduction dividend option to apply his insurance dividends to his next premium, effectively reducing his future insurance payment costs.
Step-by-step explanation:
When Dylan tells the insurer to keep the dividend and apply it to his next premium, he is using the premium reduction dividend option. This option allows the policyholder to use the dividends generated by their life insurance policy to reduce the cost of their future premiums. By choosing this option, Dylan is essentially allowing his dividends to accumulate and be used to offset the amount he has to pay for his insurance coverage, which could be viewed as a form of present discounted value in that he is applying what would be future benefits (the dividends) to reduce current costs.