I don't back up at all currently X_X. I have a 2TB drive which stores all my DATA and a 1TB for my operating system. If I need to reformat my O/S then it can be easily done. I recently upgraded to Windows 8 which is stable for now. Hard drives just suddenly failing is quite rare since you can use SMART tests to see when a hard drive is slowing down and may fail. So in that case you can rush out to get a new hard drive !
Trying to back up almost 1TB of DATA is not going to be fun...I may just buy a 3TB internal drive to back up onto.
Also if you upgrade your computer as much as I do (upgrade every 2-4 months) normally things don't get a chance to fail ^_^