My 2015 and the 2016 both mute bluetooth music for navigation guidance, dunno what setting there is to have it do that, but they both do it by default, dunno about other audio modes, never use them.

 

That is how it is in both our Venza and the Rav4, when the Navi. prompts comes on the music automatically pauses.

 

I used Navigation once so far in my 2016 SE and it did not mute the music when playing XM or USB.

 

Would anyone know if there is an option to mute the music from the raidio?

 

There is a button on the leftside of the steering wheel below the volume button. Press and hold the button to mute and unmute the audio.