Soft magnetic composites (SMCs) comprising surface-insulated Fe powders have attracted significant attention owing to their capability of producing innovative three-dimensional cores with high magnetic flux density and their potential utilization in various electrical machinery fields. The aim of this study is to fabricate SMCs with an inorganic double insulating layer, which can substantially enhance heat resistance and enable enhanced magnetic and mechanical performance through high-temperature annealing. Herein, SMCs with different inorganic coating materials (single layers of SiO2, MgO, and PO4 and double-layers of MgO and SiO2) were prepared by a sol–gel method and powder compaction. In particular, a certain double-layered SMC core (Fe@MgO@SiO2) exhibited retention of internal insulation matrix even after annealing at 900 °C and a significantly suppressed core loss owing to synergistic effects of a diffusion barrier in the primary layer and an electrical insulator in the secondary layer. As anticipated, high-temperature heat treatment at > 700 °C reduced coercivity, which enhances permeability and hysteresis loss of SMCs. The double-layered SMCs also showed an increase in flexural strength of 280% when the annealing temperature was increased from 600 to 900 °C.