The death if Elisabeth Keen was in fact faked. The goal was partly to give some time to the actress Megan Boon as mentioned by Mark Hubbard but it was also a way for the story writers to change the relation between the characters:
Jon Bokenkamp, the creator and executive producer:
Was faking Liz’s death primarily done to facilitate Megan’s pregnancy or was it a storyline you wanted to pursue anyway? Are you at all concerned that fans may feel even a little bit like you lied to them?
Regarding her pregnancy, it was both. We have discussed this arc of Liz faking her death and trying to escape Red’s shadow for some time. When we found out Megan was pregnant around episode 3.04 or 3.05, we realized we had a real opportunity. We never really considered hiding her pregnancy — I can’t imagine having Liz walking around with potted plants and standing behind furniture — she kicks ass and the show is very physical. To me, it felt totally organic for Liz to get pregnant unexpectedly. That’s life! Remember, this is a woman who wanted to be a mom, as early as the pilot. Now she has a child. It made sense to us that she would try to escape Red’s circle of influence, not just for herself, but for her newborn baby. So the whole story felt like a natural escalation in the larger story. Because of that, no — I’m not worried about the audience thinking it’s a lie. It’s not a lie; it’s what the character would do!