1. Protects you in the case of a lawsuit. While I strongly believe that most people are decent and honest, there are people out there who may sue you just because they see an opportunity to. Even if you win the case, you may end up fighting a huge, out-of-state legal battle that may financially ruin you. Protect yourself with a clear policy that takes preventative measures, such as determining how and where any disputes will be decided.
2. Clearly displays your policies to avoid confusion. Why repeat yourself over and over? Clients and customers who need to know can simply look on your website for your policies and procedures.
It is a good idea to consult with a lawyer to make sure you are meeting all legal requirements and are protected both for the state or country you are based in and any jurisdictions you do business with.