Soft magnetic composites are key materials for power and electronic devices with wide applications in energy, information, transportation and national defense. This work reviews the latest developments on the magnetic powders and insulation coatings as the two main components in the SMCs, based on which research directions of the SMCs have been pointed out. For the composition design of the magnetic powders, effects of different alloy elements on the microstructure and properties including saturation magnetization, coercivity, anisotropy, magnetostriction and electrical resistivity have been analyzed. Principles for the design of crystalline, amorphous and nanocrystalline magnetic alloy systems have been summarized. In terms of the insulation coatings, developments on organic, inorganic and hybrid coating methods have been reviewed. The research trend of the insulation has also been suggested based on revealing the insulating mechanism and the effects of key fabrication parameters on the component and structure of the coating as well as the performance of the SMCs.