I just had a very interesting experience concerning my privacy policy and my rank that I think is relevant to this post.
One of my websites, Hover Coupon, ranked page #1, result #2 on Google GLOBALLY for “Hover Coupon” and relevant terms. My website completely abides by Google’s Webmaster Guidelines, my site validates according to the W3C (Thanks to SitePoint’s awesome tutorials!), my content is all 100% unique, well-written, useful, etc. and, really, I’ve done everything right. Everything was going perfect until… I renamed my privacy policy from privacy.html to privacy.php to better integrate it into my website’s theme. I went to sleep after this.
I forgot to put a permanent redirect on privacy.html to privacy.php. Googlebot came, according to my server logs, 2 hours later and got a 404 for privacy.html. Within 12 hours, I couldn’t find myself anywhere in Google except for site:hovercoupon.com. I was showing page #1 for all terms relevant to my site’s content and if not page #1, #2, but after Google couldn’t find my privacy policy, my ranking immediately went in the toilet. I was pissed.
I created the redirect. Googlebot tried again yesterday and immediately found and indexed privacy.php. I am back to page #1 for “Hover Coupon” but second from the bottom rather than second from the top. Things probably won’t return to normal until Google has crawled my entire site, updated its cache, etc.
There are a lot of theories about “Google TrustRank” out there. One is that having a privacy policy, contact page, disclaimer, etc. greatly helps with rankings since it demonstrates trust. Matt Cutts always talks about whether or not “Google Trusts a Site” so… Yea.
In any event, DO NOT nofollow your privacy policy. Do not noindex it. Do not disallow it in your robots.txt. It is important that Google finds AND indexes this file! I can confirm from my personal experience, which I highly doubt is coincidence, that Google cares - a LOT - about these things.
Hope this helps!