It is a health concern, to have mice droppings, and urine left in the attic. I am sure, if it is very minimal and just in a few places, all insulation wouldnt have to be removed, but, chances are, thats not the case, since mice travel all over not just in one spot, so yes, it is recommended that the insulation be removed, and the attic cleaned, and all new insulation installed. If you google it, you can find many links, like the one I am posting. https://atticconstruction.com/blog/the-importance-of-attic-insulation-removal/

Mice are a recurring problem in our house, and we have had both rats and mice in the attic at times. I deal with this by setting traps and by wearing a mask and gloves when I go up in our attic. If I were to replace the insulation every time there was evidence of rodents, I'd have to get a second job to afford it because I'd be replacing it every couple of years.

I am concerned about health threats like this, but in 20 years we haven't gotten some dread disease from our problem. Having spent a good part of my career as an environmental engineer dealing with toxic and hazardous substances, I don't hold pest control companies in high regard, because they tend to overuse their products and push big budget solutions that are motivated more by profit than necessity. I'm skeptical this situation needs the drastic and expensive solution proposed.

I’ve lived in houses with rats, mice, squirrels, etc. they came and went and we never even thought about replacing the insulation. We would periodically shake out fox urine crystals which did seem to help. In an old house, it’s very hard to permanently plug all the holes. A friend has an old farmhouse and sometimes finds mice nests in bed linens. Her cats will catch some but they aren’t a total answer. I once had critters in an attic and I let my cats up there one time and I never heard the critters catching again. This is just not something I worry about too much but I can understand those who don’t want unwanted critters in their house.