I am so sorry for your loss.
I think you handled it perfectly! Kudos to you. To answer your question...Grandpa died. That is all she needs to know at this point.
When things settle down, I would find a support group for survivors of suicide for all involved. In the meantime think about starting a special memory box for her. Decorate the box, include drawings, special artifacts, photos etc. Add to it as appropriate.
Also, be sure to talk with her teacher if she is in preschool.
I do have some book suggestions but they are for older children. One that MIGHT be appropriate is "Lifetimes" by Bryan Mellonie. This is a classic book used with children to explain death. I addresses it from the point of view of nature and seasons...things have a natural season of life. This isn't a perfect fit due to the manner of death. Another book that I really like is "When Dinosaurs Die: A Guide to Understanding Death" by Laurie Krasny Brown and Marc Brown (the author/illustrator of the cartoon Arthur). This is a cartoon book. Even if you don't read it to her, it will give you a very nice direction on how to talk to her. It talks about what dead means, various customs surrounding religious ceremonies, typical emotional reactions, ways to remember someone. I recommend it highly. I used it with my children, albeit older than your dtr, when their beloved Papa died of cancer.
Hugs to you and your family.