It does happen - your iMac becomes slower and slower, than can not see you hard drive. Bummer - take your drive out, install the new HD and reinstall your OSX from media. Install you "dead" HD in external disk enclosure, hook up to your iMac via USB, FireWire most likely want work - your iMac knows that this HD serial number is considered "dead".
How about all your zillions of music, video and pictures. These are on your external drive now. How to recover them?
Answer is Disk-Drill the free disk recovery software from Cleverfiles company. It found all of my Audio, Pictures and Video files, some films are GBytes size. It took a long time to analyze whole disk.
I was more than impressed, Disk Drill actually works and it is free.
Before I discovered Disk Drill I try commercial disk recovery software, evaluated "Demo" programs and bought one for more than $100. Well, >$100 later found that it can not recover files larger than 30MB, could not find directories names nor file names. Called "support", yes "support' because there was no support. Calls and e_mails just waist of time.

Disk Drill in my opinion is the best, stable, free disk recovery utility with easy to use features.