They constitute their own phylum, Onychophora!

I can't help with what it is, but I can say why it can't be an insect. All insects have per definition exactly 6 legs.

Well... The taxonomy of invertebrates is pretty complicated and diverse and there are many huge groups of invertebrates. Velvet worms (Onychophora) seem to be their own thing, so maybe just think of them as another invertebrate group. Like molluscs (snails, mussels, cephalopods), or tardigrades or nematodes, these are all their own groups as well. But obviously this is all much more complicated if you look at it in detail.

Insects are also invertebrates, but are just one group within the arthropods, which also contain e.g. spiders, crustaceans, millipedes. Maybe a good rule would be that there aren't any worms in the insects. And that all insects have six legs. So if something has more legs, it's not an insect.

Hope that helps? The more you dig down into taxonomy, the more interesting it gets!! And insect taxonomy in itself is just so huge and mind-boggling :)

It's a Pokémon [not a serious answer]

These are part of their own family of invertebrates.

https://en.wikipedia.org/wiki/Onychophora

Insects are a specific family that have 6 legs. So a bee or an ant are insects but a spider or a rolls polly is not.

Mollusk probably (edit: snails and worms are mollusks)