How to Write a Privacy Policy for Your AI App (2025 Guide)

If you're building an app powered by ChatGPT, Claude, Gemini, or any other LLM, a generic privacy policy template won't cut it. AI-powered products have unique data flows that most legal templates simply don't address.

This guide walks you through exactly what your privacy policy needs to say — and why.

Why Generic Templates Fall Short

Most privacy policy generators were written before large language models became mainstream. They cover the basics — data collection, cookies, third-party sharing — but they miss the questions your users are actually asking:

• Does my message get sent to OpenAI?
• Will my data be used to train the model?
• Who decides what happens based on my inputs?

If your privacy policy doesn't answer these, you're exposed to regulatory risk and you're eroding user trust.

What AI Apps Must Disclose

1. Which AI providers receive user data

If a user types a message and you send it to the OpenAI API, that's a data transfer to a third party. Your privacy policy must name that third party, explain what data is sent, and link to their privacy policy.

The same applies to Anthropic (Claude), Google (Gemini), Azure OpenAI, Cohere, Mistral, and any other model provider you use.

What to write:

"We use OpenAI's API to power our AI features. When you submit a message, it is sent to OpenAI for processing. OpenAI's privacy policy is available at openai.com/policies/privacy-policy."

2. Whether you use data for training

This is the most common question users have about AI products. Do you:

• Pass user inputs to the model provider, and does the provider use them for training?
• Fine-tune your own model on user-generated data?
• Use usage data to improve your product?

Each of these is a different disclosure. OpenAI, for example, does not use API inputs for training by default — but you should still tell users this explicitly.

What to write (if you don't use data for training):

"We do not use your content to train AI models. Data sent to our AI providers is processed in real time and not retained for model training purposes."

What to write (if users can opt out):

"We may use anonymized interaction data to improve our AI features. You may opt out at any time by contacting us at [email]."

3. Automated decision-making (GDPR Article 22)

If your AI makes decisions that have a legal or significant effect on users — loan approvals, content moderation bans, hiring assessments — you must disclose this under GDPR Article 22. Users in the EU have the right to:

• Know that automated decision-making is occurring
• Request human review of a decision
• Contest the outcome

Even if you're not subject to GDPR, disclosing this builds trust.

4. AI-generated content ownership

Who owns the output? This matters for users who rely on your tool professionally. Your policy (or Terms of Service) should clearly state:

• Whether the user owns AI-generated content
• Whether you claim any rights to outputs
• Whether the AI output can be used commercially

5. EU AI Act transparency obligations

If you operate in the EU and your system makes automated decisions or interacts with users in a "natural language interface," the EU AI Act (effective August 2026) requires transparency disclosures. At minimum, users must know they're interacting with an AI system.

The Privacy Policy Sections You Need

Here's a checklist of sections an AI product privacy policy should include:

| Section | Why it's needed | |---|---| | Data we collect | Required everywhere | | AI processing | Discloses LLM provider data transfers | | Training data | Addresses user's most common AI concern | | Automated decisions | Required by GDPR Art. 22 | | Cookies | Required for most web apps | | Data sharing | Names all third parties | | Your rights (GDPR/CCPA) | Required in EU, UK, California, Canada | | Children's privacy | Required if you could have under-13 users |

How to Generate Your Policy

Rather than writing from scratch, you can use AI Policy Gen to generate a privacy policy and terms of service specifically designed for AI products. Answer a 3-minute questionnaire about your app and download a ready-to-use document.

The generator handles AI-specific clauses that generic tools miss: LLM provider disclosure, training data opt-out, EU AI Act, and automated decision rights.

Common Mistakes to Avoid

1. Copying a SaaS template SaaS templates don't mention AI providers. If your policy says "we don't share data with third parties" but you're calling the OpenAI API, that's a material misrepresentation.

2. Using vague language about training "We may use your data to improve our services" is not enough. Users specifically want to know about AI training. Be explicit.

3. Ignoring the EU AI Act The EU AI Act introduces new obligations for AI systems operating in or affecting EU residents. Even if you're based in the US, if you have EU users, the Act applies to you.

4. Not updating your policy when you add new AI features If you add a new LLM provider or start using data for fine-tuning, update your policy and notify users.

Final Checklist

Before publishing your privacy policy, confirm it answers these questions:

• [ ] Which AI providers receive user data?
• [ ] What data is sent to each provider?
• [ ] Does your provider use API data for training? Do you?
• [ ] Can users opt out of data use for AI improvement?
• [ ] Does your AI make automated decisions with significant effects?
• [ ] Who owns AI-generated content?
• [ ] Are you compliant with GDPR, CCPA, and EU AI Act for your user base?

A privacy policy that clearly answers these questions protects your business and builds the kind of user trust that's increasingly hard to earn in the AI era.